Expectations of a cut of 0.25% by the Bank of England on Thursday have increased sharply on the back of yesterday’s woeful Halifax housing data. A plea by an increasingly desperate sounding Gordon Brown ‘because we have low inflation……we can cut interest rates’ suggests that Merv and his mates will have one eye on the knighthoods and do the decent thing sooner rather than later.

Get your alarm clocks set: the BOE rate announcement is at 1200 BST with the ECB announcement at 1245 BST and the press conference follow-up at 1330.

If I were Merv, I’d stick a proverbial 2 fingers up, just to show that ‘political interference’ wasn’t much appreciated. Given that there is a disconnect between Base Rate (5.25%) and LIBOR (5.93%) will a cut in rates make a huge difference anyway?

As a result of the ‘credit crunch’ and despite 2 prior rate cuts, UK mortgage rates have been rising. Lenders have been falling over themselves to get out of the mortgage market; there are about 4000 different mortgage offers around now, down from over 5000 just ten days ago and 15000 a year ago. 100% mortgages have been consigned to history by all the major lenders, whilst premium rates are being charged for those with small deposits.

With the Euro hitting all time highs against the £, further rate cuts are likely to raise imported inflation and increase the chances of Swerving Mervyn putting pen to paper in a ‘Dear Chancellor-we told you inflation was going up’ letter. As in ‘What with all the fags, booze and other tax rises you whacked through recently, let alone higher petrol and energy costs is it any bl**dy wonder inflation is up’ type letter.

In common with the Whiskas cat food advert, 50 out of 61 economists polled by Bloomberg News expect a cut of 0.25% by the BOE tomorrow. A cut of 0.5% is a very long shot given that the vote at last month’s rate setting meeting was 7-2 in favour of ‘no change’, with the 2 (John Gieve and David Blanchflower) voting for a cut of 0.25%.

In Euroland there’s not much rate cut cheer expected from JP Trichet and his merry men at the ECB, especially as there is a G7 meeting this weekend. Both the ECB and BOE have control of inflation as a core goal, rather than the Federal Reserve’s more generalist ‘lets keep the economy rolling remit’. See Mr FT’s excellent article More Cred than the Fed for more.

Recent data out of Europe suggests that inflation concerns remain-a couple of ECB members have been worried about the effects of rising wage demands as this story suggests. Nor is there currently much concern about Europe going into recession-not yet anyway. There are a number of divergent factions inside the ECB with some suggesting that prospect of faltering economic growth (e.g. the decline in Irish & Spainsh property markets and asset write-downs by German banks) could be ameliorated by a rate cut.

Others are concerned that a strong currency is making life difficult for exporting companies. And there are those who are worried about the inflation ‘genie’ escaping from the bottle. Should make for an interesting meeting-but goes to show that certainly in interest rate terms ‘one size doesn’t fit all’.

Although the rate announcement is at 1245 BST, the market always focuses on Monsieur Trichet’s remarks made at the press conference which begins 45 minutes later.

J-P T’s comments and responses are scrutinised for nuances and often mis-interpreted by the market, making for wild swings in the EUR/USD exchange rate.

Although this time round a UK rate cut of 0.25% appears to have been discounted by the market, I’ll be looking to trade FTSE, especially if something unexpected (like a 0.5% cut-or no change) is announced at midday.