Penalties to pay on rates if England wins World Cup

The Bank of England's Monetary Policy Committee should be watching the national team's World Cup matches very carefully. David Beckham's boys could unhinge an economy already unbalanced, forcing interest rates up sooner and by far more than otherwise necessary, say City analysts.

The optimistic footballing scenario sees Beckham lifting the World Cup in Yokohama in a month's time. Past precedent suggests that such a victory will see retail spending surge out of control, as the nation celebrates by splashing out.

'After France's victory in World Cup '98, growth in retail sales volumes took off. A feelgood factor was also noticeable in German figures after their 1990 victory,' says Alan Castle, UK economist at Lehman Brothers.

'Given the climate we're in at the moment a win would raise concerns going forward for the Bank of England.'

Conversely, economic activity suffers the most if a nation falls near the final hurdle - at the semi-final stage, for example. England going out in the semis may help consumers slow exuberant spending and delay rate hikes.

The Bank is already estimating a 68 per cent chance of missing its inflation target in two years' time. The Monetary Policy Committee meets on Wednesday and Thursday, and will consider raising rates as a pre-emptive measure to stop inflation mounting. The City only gives an outside chance of a rise on Thursday.

The European Central Bank and the Swedish Riksbank may also raise rates.

Wednesday's MPC meeting will be the first since the exit of vocal outsider Sushil Wadhwani. Economists believe this will shift the balance of argument on the committee.