Some of the risks associated with rate cuts have dissipated for sterling. We expect rates to remain on hold as the economic picture in the U.K. stabilizes.

Rate cuts may spur credit growth, however a government will have to keep a closer eye on it's inflation in order to minimize the demand pull inflationary effect

The ECB is likely to hike rates again in 2006, but, unless sterling plunges or equities soar, the MPC probably will cut again.

The upshot of all this is that the next move in rates is still likely to be up, but not until the data give the go ahead.

If we remain complacent, we'll be a second-rate competitor.

What we are looking for is interest rate cuts to be beneficial to the market.