Although a downwards movement is now thought more likely than a hike, it hardly came as a surprise that Bank of England left the base rate unchanged this month at 4.5 per cent.

Certainly the current rate has not prevented a rise in the number of mortgage applications in recent months while Christmas sales held up better than feared.

The Nationwide’s latest Consumer Confidence Index rose by 1 point to 98 in January. Although still 10 points down on a year ago, the three month trend suggests ‘confidence has turned a corner and is now showing signs of an upturn’.

However, ‘peoples’ optimism about house prices fell in January following the large rise seen in December, said Nationwide executive director Stuart Bernau. ‘Consumers now expect house prices to rise 2.6 per cent over the coming six months suggesting that the strong pick up in housing market activity seen over the last couple of months may begin to stabilise. The fall this month brings consumers’ predictions more in line with Nationwide’s own forecast of a 0 to 3 per cent change over the year’.

The Royal Institution of Chartered Surveyors said the Bank’s decision to leave interest rates unchanged was ‘the right decision for now’.

After a slow 2005, the economy has shown increasing signs of picking up, as the service economy expands. The recovery in the housing market since last summer has been maintained. The number of new buyers has risen for seven consecutive months, while the number of property sales has risen by 13 per cent over the past year, said RICS chief economist Milan Khatri.

‘However, the Bank of England should examine the need for a spring-time interest rate cut. A recent increase in unemployment could damage consumer confidence. The manufacturing sector also remains fragile and has failed to take advantage of a robust global economic climate, therefore inflation pressures in the economy as a whole remain quite muted’.

UK and US base rates are now level for the first time since January 2001 when they both stood at 6.0 per cent.