Some believe that the Fed panicked last week as they dropped the base rate by three quarters of a percent, others believe that they took this action so that they can cut the base rate again this week by another half a percent. If they had cut it this week by one and a quarter percent, it is more likely to have caused fear in the markets as against the ‘hope’ and excitement. Either way we are all set up for some excitement this Wednesday, as they get together for their normal scheduled meeting.

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It would appear that consumers are showing signs of cutting back significantly, as we saw both the US and UK retail sales fall far short or expectations. Inflation rose by 2.1% on an annualised basis for the UK rising by 0.6% in the month. US core inflation increased by 0.2% for the month.

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Last week was relatively short of news although we still saw a few surprises. The Halifax House Price Index showed that house prices in the UK increased by 1.3% in December. The UK interest rate decison was a surprise for some as the rate was left untouched, we would suspect that the minutes will be of greater interest when we see how the voting went.

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Last weeks US employment figures were quite a disappointment proving that the economy was weakening more than expected. This week starts off with little news thus greater emphasis will be put on speeches made by key personnel.

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