Dental caries in the Bank gift horse's mouth

At 11.59 yesterday morning, the City was thinking about an early lunch. The Bank of England was about to announce its decision on interest rates, but few expected anything other than a 15th month pegged at 4%.

A minute later it was sandwich-at-the-desk time and the complacent mood had turned distinctly febrile. While the CBI and the TUC were whooping it up, seeing the move as a long overdue nod to the plight of British industry, dealers in the Square Mile were having darker thoughts.

Here is the way the thought process went. First, shares have just suffered their second worst January on record and the FTSE 100 is barely 50% of where it was before the bear market began three years ago. Second, the FSA only last Friday announced that it was relaxing the solvency requirements for life insurers in an attempt to prevent forced selling of equities driving the market still lower. Then this. What, the City asked itself, does the Bank know that we don't? What nasty surprise is lurking out there?

In this sort of market, if you have even the slightest suspicion that there is trouble ahead you sell first and look for the hard evidence later. The Bank's argument, of which we will doubtless hear more when it delivers its quarterly inflation report next week, is that the boost to consumer spending provided by cheaper money is to compensate for the much gloomier outlook for manufacturing and exports.

This is a perfectly sound point. The trouble is that it comes hard on the heels of Eddie George and Gordon Brown waxing lyrical about the underlying strength of the economy. Markets have short memories, but not that short.

As they saw it yesterday, the cut means either that the economy is going to grow much less rapidly this year than Brown is predicting, which makes shares a sell, or a big institution is about to go belly-up, which makes them an even bigger sell.

No rail grail


You wait ages and ages for one to turn up, then 4,000 arrive in four years. Among the very few successes of rail privatisation was an unprecedented influx of new railway carriages, ordered by mustard-keen, green-as-grass train operators in the days when Britain's rail network looked like an attractive business opportunity.

Virgin's gleaming Pendolinos made their debut last month on the west coast mainline. In the south-east, hundreds of air-conditioned carriages are replacing British Rail's ancient slam-door stock.

By the time all the trains on order are delivered, the average age of rolling stock in Britain will be just over 16 years, compared with 25 years before privatisation. That may still sound old to the average commuter, but it makes our fleet one of the youngest in Europe.

Unfortunately, that success story is about to hit the buffers. Senior industry sources now reckon that only 800 carriages are likely to be ordered between now and 2010, rather than earlier hopes of 4,000. That means that the rate of new vehicles will drop from 1,000 a year to 100.

GNER, Midland Mainline and Great Western are due to renew their high-speed trains, while a few regional operators intend to buy some new diesels - but that's about it.

Given the government's ambitions for the railways, that simply will not do. Ministers want to increase passenger numbers by 50% by 2010. The strategic rail authority reckons a more realistic figure is 25% to 35%. But neither will be achievable without lots of extra trains.

Many of the services on the network are full to bursting. To add capacity, rail bosses can either lengthen trains or increase the frequency of services. Both require extra rolling stock. The reluctance of operators to place orders is yet another sign of the prevailing pessimism on the railways.

Peacock fans


The polite and helpful receptionist at Peacock, the Cardiff-based discount retailer, was happy to explain yesterday afternoon. The car park empties at 5pm. If we want to talk to the chairman, John Lovering, we will have to call back in the morning.

Perhaps the financial services authority will have more luck in getting through when it poses the inevitable question about what Mr Lovering thought he was doing buying 50,000 shares in Peacock on Monday at 79p apiece when the company was set to issue a decidedly upbeat statement three days later.

Yesterday's trading update was of the best-practice type - issued to coincide with an analysts' visit to Peacock's newly refurbished stores. But the news was good for a 7% rise in the company's share price to 88.5p, making the chairman look like Mystic Meg.

We doubt there was anything sinister here. Peacock issued a similarly positive post-Christmas trading statement and directors such as Mr Lovering probably (albeit wrongly) believed they were in an open period for share trades.

But in these nervous, disclosure-obsessed days he really should have known better. Or at least the company's corporate broker, Investec Henderson Crosthwaite, should have warned him.