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The Bank of England - as expected - kept interest rates on hold at 5.25% yesterday.
The stock market breathed a sigh of relief, with the FTSE 100 ending 71 points higher at 6,227.
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But elsewhere in the world, the squeeze on global liquidity continued
Central banks around the world are continuing to fight the good fight against inflation, even if our own Bank of England decided to take a break yesterday.
The Reserve Bank of New Zealand raised the country's key interest rate by a quarter point to 7.5%, a record, while governor Alan Bollard warned that more increases were not out of the question.
It's the first time rates have been raised in the country since December 2005. Economic growth had slowed, but is now rebounding from the seven-year low seen last September. Fourth-quarter growth is expected to come in at twice the bank's original forecast because of stronger-than-anticipated consumer demand, fuelled by the ongoing strength of the housing market.
Meanwhile, as expected, interest rates went up in the Eurozone, from 3.5% to 3.75%. The region saw its strongest growth in six years last year, and the European Central Bank is worried, just like its peer in Britain, about wage inflation. IG Metall, which is Germany's biggest union, is calling for a pay hike of 6.5% this year, for up to 3.4m workers.
The freeze on rates in the UK is likely to be strictly temporary too. As well as the reasons we cited yesterday for higher rates (Will the Bank of England raise interest rates today?), the latest news from the housing market suggests that - just as in New Zealand - property is still being snapped up, despite three rate hikes since August.
Figures from the Halifax suggest that prices rose 1.8% in February, sending annual house price inflation to a two-year high of 11.1%. The building society's data does tend to be stronger than most of its rivals, but even so, the figures will just give more ammunition to the argument for higher rates.
As anyone who saw last week's house price forecast edition of Tonight with Trevor McDonald will realise, we don't expect this happy state of affairs in housing to continue for much longer. People are having to stretch themselves further than ever to get on the market.
In fact, my colleague, Jody Clarke, was just speaking to Alex Cresswell-Turner, the founder of Lombok for our 'My First Million' column. For those who don't know, Lombok is a furniture retailer, targeted towards the higher end of the middle market. As you might expect, Mr Cresswell-Turner said that business had been fantastic during the housing boom from 1996 right up until 2002, "it was the best time in 20 years."
But despite the ongoing buoyancy of the housing market, things aren't quite as spectacular for his sector of the market now. Why? "What's happening now, house prices have gone up so much that people are being stretched to their maximum and leaving much less money for homewares," said Cresswell-Turner.
"With mortgage sizes getting bigger and bigger as a percentage of income, consumer debt at all-time highs - I think it's come to a stage where they'd love to have an expensive piece of furniture, but I just can't afford to."
We'd also suggest that the massive number of buy-to-let investors now propping up the market is probably another reason for the slowdown in quality furniture sales - the average amateur landlord has neither the need nor the inclination to kit out their property with anything fancier than an Ikea sofa. With more and more landlords falling into negative cash-flow, they probably don't have the money even for that, in between subsidising their tenants' monthly rental payments.
And all of this over-stretching is happening at a time when the economy is apparently in great condition. We have to ask - what will happen if things turn bad?
Turning to the wider markets
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In London, the FTSE 100 closed 77 points higher on Thursday, at 6,227, with mining stocks including Vedanta, Kazakhmys and Antofagasta leading the gains. For a full market report, see: London market close
Across the Channel, stocks also closed higher. The Frankfurt DAX-30 gained 95 points to end the day at 6,713, whilst the Paris CAC-40 closed 69 points higher, at 5,524.
On Wall Street, the Dow Jones gained 68 points to close at 12,260 yesterday. The S&P 500 climbed 9 points to end the day at 1,401. And the Nasdaq closed at 2,387, a 13-point gain.
Positive machine orders data and a weaker yen cheered investors in Japan and saw the Nikkei 225 index gain 73 points to end the day at 17,164.
Crude oil had slipped 16c lower today, and was last trading at $61.48. In London, Brent spot was also lower at $61.10 a barrel.
Spot gold was last quoted at $652.60/oz this morning and silver had climbed to $12.97/oz.
And in London this morning, newspaper publisher Mecom announced a £570m share issue planned to fund acquisitions including Germany's Berliner Zeitung. The company, run by former Mirror Chief Executive David Montgomery is placing 731m new shares priced at 78p each.
And our two recommended articles for today...
How (not) to fix a housing crash
- Ben Bernanke may have assured US politicians that the US sub-prime mortgage collapse is 'under control' but the market doesn't seem to agree. To find out why the Fed has a lesson to learn from the last UK housing crash about the dangers of cheap money, click here: How (not) to fix a housing crash
Has the China squeeze begun in earnest?
- Stephen Roach doesn't know whether the recent rout on the Shanghai stock market was a brief flash or the start of something big. Yet the major imbalances within the economy and conjecture that market falls were prompted by insider selling are cause for concern. For more on why any investor expecting unbroken Chinese growth could be in for a rude awakening, read: Has the China squeexe begun in earnest?
