January Bank rates are likely to stay steady

THE European Central Bank (ECB) is likely to keep interest rates on hold when it meets for its first policy meeting this year, analysts predict.

“We believe the continued improvement in the forward-looking survey data will have been sufficient to stay the hand of those on the council who last month were willing to wait and see before lowering rates,” said Nick Matthews of Nomura.

“We believe the next 25bp interest rate cut by the ECB will most likely take place in March (or potentially earlier).”

Also on Thursday, the Bank of England is set to review interest rates, with analysts expecting no change.

“We expect the committee to keep policy on hold, with the Bank rate at 0.50 per cent and QE at £375bn. Our baseline forecast is for no additional QE in the immediate future, but should the growth outlook deteriorate further, there could be more loosening,” said Barclays’ Blerina Uruci.

In other economic news, tomorrow brings the release of the British Retail Consortium (BRC) retail sales monitor, plus a swathe of EU data, including consumer and economic confidence, retail sales and the unemployment rate.

On Wednesday the BRC’s shop price index will be released, along with UK trade balance figures.

The week ends with UK industrial and manufacturing production figures on Friday.

The corporate calendar sees trading announcements tomorrow from Balfour Beatty, Persimmon, Robert Walters, Debenhams, Interserve and Domino’s Pizza.

On Wednesday Restaurant Group, supermarket giant Sainsbury’s, Greggs and Ted Baker will all report.

On Thursday Bwin.party, Goals Soccer Centres, Hays, Hilton Food Group, Rathbone Brothers, SIG, Tesco and Marks & Spencer are all set to update the market, while Tullow Oil will report on Friday.

Panmure Gordon gave an optimistic forecast for Tesco, giving it a “buy” rating and a target price of 440p.

Analyst Philip Dorgan said: “We believe that Tesco has had the strongest Christmas sales growth of the Big Four....It sets up very nicely what we believe will be a year of significant strategic change. We expect to see a substantial reduction in capital expenditure, a refocus online and a commitment to much higher ROCE (return on capital expenditure) and sustained share buybacks.”