Jeremy Warner's Outlook: Thank goodness for the cold weather, but retailers shouldn't count on rate cut help

Unfortunately, a change in the weather won't itself be enough to reverse what the CBI has called some of the worst trading conditions on the high street in more than two decades.

Only the Chancellor believes the present slowdown in economic growth is down entirely to rising oil prices and the failure by our European partners to engage in necessary economic reform. He conveniently ignores the other half of the story, which is the unsustainable nature of the debt-fuelled boom in consumption that has ruled throughout most of his Chancellorship.

Mr Brown has already admitted his official growth forecast of 3 to 3.5 per cent for this year is toast. Even the revised forecast of 2 to 2.5 per cent, let out of the bag at the recent International Monetary Fund meeting in Washington, is beginning to look optimistic. All we need now is a nasty dose of bird flu and the economy might fall into outright recession.

Time for the Bank of England to deliver the goods and start cutting interest rates again, you might think. Well, not necessarily. There is a confluence of economic news this week, which started with yesterday's inflation figures, and continues today with the minutes of the Monetary Policy Committee's (MPC) last meeting. Tomorrow comes the latest retail sales figures while on Friday we get the ONS's first estimate of GDP growth for the third quarter. Yet I doubt we'll be any clearer about where the economy is going by the end of it.

A clear division has appeared on the MPC between those who see the primary risk as being to growth, and those, like the Governor Mervyn King, who want to see the Bank's credibility in meeting its inflation target defended at almost any cost. It's not yet clear which view will emerge triumphant.

Yesterday's inflation number, with the targeted consumer price index rising from 2.4 per cent to 2.5 per cent, gave succour to both sides of the argument. This was less than many economists had predicted, but it was quite bad enough, with the cost of services now inflating away at more than 4.5 per cent and even previously deflating goods showing some uptick in prices.

Britain has been through the wars in freeing the economy from the shackles of its inflationary past. To put such a prize at risk hardly bears thinking about. Yet it might require only a quite small rise in inflationary expectations to trigger a second round outbreak of inflationary wage claims. With the economy still quite close to full employment, despite the economic slowdown, and disposable incomes being squeezed by rising levels of taxation and energy prices, this is all too possible.

Furthermore, the deflationary effect on the price of goods of the strong pound seems largely to have run its course. Alarming producer price inflation news from the US yesterday makes it virtually inevitable that the Federal Reserve will continue to tighten policy well into the new year, which in turn holds out the prospect of US rates higher than our own by January, possibly sooner if we cut our own rates again in the meantime.

This is bound to do more damage to the value of the pound, further undermining the contribution the currency has made to low rates of inflation. There is a real danger that the comparatively high rates of inflation already being experienced in domestic services will become dominant in the overall cost of living index.

Mervyn King is right to want to keep his powder dry. There's still plenty to worry about on the inflationary front, while if the economy really does tank, he'll have plenty of monetary ammunition left to throw at it. In the meantime, retailers will just have to keep praying that the cold weather holds.

Strategically challenged Royal Mail

On 1 January Royal Mail's monopoly is consigned to history and the postal market is fully opened to the chill winds of competition. But in its wisdom, the regulator Postcomm wants to force Royal Mail to keep the prices charged to business customers artificially high so granny can still afford to send a birthday card at an artificially low price.

Allan Leighton, the chairman of Royal Mail, describes this moment as the "tipping point" - in other words, the point at which rival mail firms start to plunder its business market, cash flow turns negative and stamp prices ultimately have to go back through the roof to keep the business solvent.

His answer is to gift Royal Mail's 160,000 posties a 20 per cent share in the company on the grounds that this will lift morale and performance. His original plan was to give them 51 per cent but this would smack too much of privatisation to a Government with an apparent manifesto commitment against it.

In any case, Mr Leighton said yesterday, Royal Mail is in no fit state for privatisation and he is probably right. Government policy since 1997 has saddled the company with the worst of both worlds. On the one hand, it is still 100 per cent state-owned and thereby constrained by the dead hand of Whitehall. On the other, it faces prescriptive price regulation, with massive fines for poor service and, unlike any other postal monopoly in Europe, the full liberalisation of its domestic market.

On top of that it has a £4bn pension deficit to deal with. No wonder Royal Mail's Dutch and German counterparts are laughing all the way to the letterbox. Their profit margins are two and three times those of Royal Mail's, thanks to high prices and protected markets, allowing them to prepare for the liberalisation of their own postal services at a much more leisurely pace while attacking the soft underbelly of the Royal Mail at the same time.

To give the Royal Mail workforce 20 per cent of the company looks like a token gesture at best and a waste of taxpayers' money at worst. If the Government hadn't already queried the pitch by pushing ahead with deregulation before Royal Mail was ready for it, full-blown privatisation might have been the best course.

As it is, the Government looks like being left with a wasting asset. The Trade and Industry Secretary, Alan Johnson, himself a former postie, has asked Sir George Bain to deliver a solution before Christmas. It looks like an impossible task.

Football rights; good principle, bad result

BSkyB has long been resigned to the likelihood of losing exclusive rights to screen live Premier League football games. Rather, its argument with the European Commission has been about how much exclusivity it would need to concede. NTL and ITV wanted any single broadcaster to be restricted to no more than 50 per cent of the games.

In the event, Neelie Kroes, the European competition commissioner, seems to have agreed to compromise proposals under which the rights will be split into five equal packages, with Sky allowed to own as many as four. This promises to generate more of an auction than we've seen in the past, while retaining the principle followed by the League to date that a broadcaster is likely to pay a great deal more for exclusivity or near exclusivity than it is for something less.

Even so, you have to wonder what the Commission is doing interfering at all. If the rights are split, viewers will have to pay two sets of subscriptions to gain access to all the games, in place of the one price they pay at present. Almost certainly it will end up costing them more. Great result, Neelie.

j.warner@independent.co.uk