Tightening later this year?

Others believe that although May might not be the right time for a BOE rate hike, the second half of 2005 could still produce another nudge higher in British rates.

“There is the possibility of a rate hike in the second half,” says Kathleen Stephansen, director of global economic research at Credit Suisse First Boston. “We believe the target will be at 5 percent by year-end.” Analysts at 4Cast Inc. are in the ratehike camp.

“We still expect one more tightening in this cycle,” says Ray Attrill, director of research at 4Cast Inc. “But, it remains a close call whether it comes as early as May or perhaps August. Recent data is offering enough of a mixed picture about the health of consumer spending and the extent of spare capacity or labor market slack to leave the ‘wait-and-see’ faction of the MPC in the driving seat. But that could quickly change with a couple of strong numbers.”