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Last Updated: Thursday, 10 November 2005, 08:32 GMT
UK base rates 'to stay unchanged'
Base rates
The Bank of England's rate setting committee is expected to keep the cost of borrowing unchanged at 4.5% when it makes its announcement later Thursday.

Only a few weeks ago analysts predicted a rate cut in November, but that was before figures showed inflation rose to an eight-year high in September.

Inflation hit 2.5%, well above its 2.0% target, due to high oil prices.

Keeping a lid on inflation is a top priority for the BoE, despite pressure for a rate cut from business leaders.

Next week, the Bank of England will publish its Quarterly Inflation Report, which will give a clue as to its long-term thinking.

We believe the MPC will adjust interest rates higher in the New Year
Alan Clarke, economist, BNP Paribas

"Discussion at the meeting is likely to have been heavily influenced by the forthcoming inflation report," said Simon Rubinsohn, chief economist at Barclays.

Waiting game

Another reason to keep rates unchanged this month will be official figures showing a better-than-expected 0.7% rise in retail sales in September.

Consumer demand appears to be stabilising despite ongoing complaints from retailers that the High Street is still a tough place to do business.

And there are signs of revival in the housing market after the sharp slowdown this year.

Bank of England Monetary Policy Committee
Inflation is likely to pre-occupy the nine-member committee

However, the manufacturing sector is still struggling - despite signs of greater demand in the euro zone - leading to pressure from industry leaders for an early rate cut.

The nine-member Monetary Policy Committee (MPC) voted unanimously to keep base rates on hold at 4.5% in October, according to minutes of last month's meeting.

Although most economists now believe that rates will be kept on hold until next year, they are divided on when the Bank will make another move.

"As the data continue to firm and upside risks to inflation build, we believe the MPC will adjust interest rates higher in the New Year," said Alan Clarke, economist at BNP Paribas.

The MPC last shifted base rates in August, moving them down a quarter point to stimulate economic growth.

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