UK Retail sales figures for September rose more strongly than market expectations, rising by 0.6% against forecasts of just a 0.1% rise which takes the annual rate to 6.3%, the highest in 3 years.

A breakdown of the ONS statistics showed strong demand for toys and games which was probably in response to heavy discounting by retailers in the light of product recalls of chinease contaminated toys which suggested that if the recalls continued there may be a lack of toys for Christmas.

Speculation of an imminent Uk interest rate cut has been growing since the Northern Rock credit crunch event which resulted in the first run on a British bank in nearly 150 years. Many market commentators were expecting an interest rate cut firstly at the October meeting and subsequently at the November meeting. However today's consumer figures have abated that speculation to a degree, and now appears to bring the consensus in line with the Market Oracle forecast of the first interest rate cut being scheduled for not earlier than January 2008. By which time consumers will start reacting to a falling housing market.

UK Interest Rate Forecast for 2008 - As of 22nd August 2007

UK Interest Rates to Fall to 5% by September 2008, First Cut in UK Interest Rates to Occur in January 2008 (22nd Aug 07), (18th Sept 07)

UK Interest Rate Forecast for 2007 - As of 26th December 2006

UK Interest Rates to Peak at 5.75% between Aug and Oct 07(26th Dec 06), (7th Nov 06)

By Nadeem Walayat
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Nadeem Walayat is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 100 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

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