High street gloom fuels hopes of interest rate cut

THE Bank of England is on the brink of cutting interest rates, with financial markets betting that weak retail sales and a slowing economy will force Mark Carney’s hand later this month.

Ten days ago traders believed there was just a 5pc chance of a rate cut on Jan 30. But a spate of poor economic data combined with hints from the outgoing Mr Carney and his colleagues sent the probability soaring to more than 70pc yesterday.

Economists had expected to see signs of life in December’s retail sales numbers, predicting that growing wages and record employment would encourage households to spend enthusiastically. Instead, the high street suffered a painful December as frugal families tightened their purse strings, spoiling what is usually the most profitable period for retailers.

Sales fell by 0.8pc last month compared with November, meaning shops have not seen a single month of growth since July, according to the Office for National Statistics.

This is the longest period of decline since records began in 1996. The pound dropped another 0.4pc on the data, falling to $1.30 as traders anticipate a rate cut from the Bank of England to shore up the economy.

Such a move would take the interest rate down from 0.75pc to 0.5pc, back to the same level which Mr Carney inherited when he was appointed Governor in 2013.

Separate retail figures, from accountants BDO, say like-for-like sales fell 0.9pc in 2019 – the fifth consecutive year of decline.

The figures lay bare the challenges facing many high street brands, which have to grapple with high day-today running costs, fewer visits to stores and competition from online rivals.