It says something about the enduring status of Marks and Spencer, the yoghurt to Y-fronts middle market retailer, that its weak Christmas trading statement has prompted calls for the Bank of England to cut interest rates. But when the Bank’s monetary policy committee meets on Thursday it should consider all the data on consumer spending, and whether they are worse than expected.

In its last Inflation Report, back in November, the Bank implied it would cut rates once in the first quarter of 2008 and again before the third quarter. It has already made the first cut, by 25 basis points to 5.5 per cent, in December. The question is whether the news has been so unexpectedly bad that the MPC must cut again immediately.

There is ample evidence – from consumers, banks and the housing market – that the economy is slowing. But the economy needs to slow. The previous, superheated pace of credit and house price growth, and the overall strength of output, was not compatible with 2 per cent inflation over the medium term.

So have things got much worse? A US recession has become somewhat more likely after recent news. There is now firm evidence that the credit squeeze is making it harder for households to borrow. Many surveys of consumer and business confidence have been weak.

But in other areas the data are mixed. It seems to have been a bad Christmas for retailers’ profits, but not so bad for their sales, which rose by a total of 2.3 per cent in December compared with the same month last year. In the housing market, though the trend is weak, it is not clear that values are falling. The Bank would welcome a gentle decline in house prices anyway.

There has also been an increase in inflationary risks. Sterling has fallen sharply in recent weeks, which increases import prices, while energy and commodity prices are resurgent. One reason not to cut rates on Thursday is to wait and see how those price rises feed through into utility bills, and whether a tricky pay bargaining season produces inflation-busting rises.

UK monetary policy is still restrictive and, given tighter credit conditions and US weakness, lower rates will be needed to prevent inflation falling below its target. A good case can be made for cutting now, to insure against a severe economic slowdown, but with inflation still a worry that could backfire. The best policy, on balance, is to keep rates on hold until the publication of the Bank’s updated economic forecasts in February. M&S will have to find other ways to sell more profitable knickers.

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