The chances of another British interest rate cut in the new year increased on Wednesday after news that one Bank of England policymaker had wanted borrowing costs to come down two weeks ago.
Minutes of the December 7 and 8 Monetary Policy Committee meeting showed Stephen Nickell opposed this month's decision to keep rates at 4.5 percent, preferring a quarter-point reduction for fear that inflation would undershoot its 2 percent target. The FTSE-100 index of leading shares rushed to a 52-month peak, interest rate futures soared and the pound fell as financial markets started pricing in lower rates next year.
Even the news that the Confederation of British Industry distributive trades survey showed retail sales putting in their best performance in 10 months in the run-up to Christmas did little to quell talk of impending rate cuts.
"The break in the MPC's unanimity is quite surprising given the host of comments suggesting that most members were happy with rates at 4.5 percent," said Philip Shaw, chief economist at Investec.
"We think pressure for a rate cut will mount in the coming months as growth remains low, inflation is muted and pay settlements are modest."
Some of the committee already think the risks to the BoE's main economic growth forecast are weighted to the downside, according to the minutes. But some members also said the current stance of monetary policy was still "mildly accommodative".
Most policymakers wanted to wait and see how the January wage round and the crucial Christmas shopping season would pan out before committing themselves to any course of action.
Signs from Britain's huge retail sector have been mixed.
Clothing chain French Connection, electrical shop Dixons and home improvements store B&Q have all bemoaned tough trading conditions in recent weeks.
But supermarket Waitrose says it expects a record-breaking Christmas and shares in Britain's biggest clothing retailer, Marks & Spencer Plc, have risen to hit a seven-year high on optimism about its recovery.
The CBI survey tied in with other signs noted by the BoE of a tentative pick-up in consumer demand which had slowed sharply since the start of the year under the weight of higher energy and borrowing costs.
The main sales balance jumped 35 points to 0 in December - its highest since February and indicating that volumes matched year ago levels after big annual declines in previous months.
That was the biggest one-month improvement in the survey, which has been consistently gloomier than official data, in more than 10 years and easily outstripped retailers' and analysts expectations for December.
"The survey confirmed anecdotal reports that have been flooding in that retail spending over the Christmas period has been strong," said Alan Clarke, economist at BNP Paribas.
"The series is still low by historical comparison, but belatedly is showing signs that the worst news is behind us."
The CBI noted its survey was better than expected but said the improvement was due to aggressive price cutting.
"Christmas, in retailing terms, is coming later and later each year as consumers play chicken with the high street and delay their spending in the expectation of late price cuts as the big day draws nearer," said Ian McCafferty, the CBI's Chief Economic Adviser.
The big growth areas in December were in groceries, footwear and clothing which benefited from the colder weather, the CBI said.