Last week provided some interesting developments in the markets understanding of the Bank of Englandâs current thinking. Firstly, there were the minutes which meet consensus in terms of the vote but left the market somewhat surprised when it was revealed that John Gieve, not Rachel Lomax, voted for a cut. John Gieve currently the deputy governor for financial stability has the most intimate link with the markets so his decision to move from his usual hawkishness is highly significant, as was pointed out by the Daily Telegraph last week. The minutes also highlighted the fact that the MPC discussed cutting rates as an option which means that it is firmly in the minds of some members even though the majority saw fit to remain on hold citing upside risks to inflation and wages. The current dilemma was also evident in Lomaxâs comments last Thursday when she reiterated the same line as Mervyn King in that the MPC is paying close attention to the emerging data. Heading into the forth coming week and as the credit crunch continues to grind away at the UK economy, it would be no surprise that consumer credit, mortgage credit and mortgage approvals numbers out on Thursday are expected to show further declines. We will also see the release of the Nationwide house price survey for November, expected to have followed a similar fate. Consensus is for an M/M reading of 0.2% (Prev. 1.1%) and 8.4% Y/Y (Prev. 9.7%). The BoE agents said last week that demand for housing and house price inflation is already down in most UK regions, and with the government also announcing December the 14th as the introduction date of HIPs, the housing sector outlook is looking increasingly gloomy. Elsewhere, Inter-bank lending rates will continue to be under pressure as the credit jitters show no signs of dissipating. If rates continue to squeeze higher and with the ECB set to add liquidity when needed, it could see the already battered BoE under further pressure to respond in order to elevate the market. The key event for the week then will be on Thursday when King and several of the MPC shall testify to the treasury committee. No doubt questions will be asked regarding the on-going situation with Northern Rock and preventing a similar occurrence as well as the current thoughts on tackling inflation and dealing with inter-bank rates. Both Blanchflower and Sentence are also scheduled to speak on Tuesday. Supply this week will come in the form of a GBP 2bln 4.50% 2042 auction.