The cost of borrowing is expected to go up again on Thursday, with any announcement set for 1200 GMT after the Bank of England's Monetary Policy Committee (MPC) completes its second day of discussion.

Most economists expect a quarter-point rise in the bank's base rate to 6% - the fourth increase in recent months.

If passed on in full to home owners, a 0.25% increase would typically mean an extra £12 a month on interest repayments for an average £60,000 loan.

Unions and many business leaders have called for the Bank to hold off from a further rate rise.

But some economists believe even tougher action is called for.

"I think it would be better were they to make a rather more aggressive move and put interest rates up by a half per cent," said Richard Jeffrey, economist at CCF Charterhouse.

"The issue here is trying to get the mesage across to consumers that they have to behave in a more circumspect way, and I really don't think that the quarter per cent moves we are seeing at the moment, the drip feed in terms of interest rates, is getting that message across."

Inflation fears

The MPC is expected to raise rates to fend off a rise in inflation.

The underlying rate of inflation currently stands at 2.2% - below the government's target of 2.5%.

However, the inflation "hawks" among the nine-member MPC are known to be worried about rising consumer confidence and the steep climb in house prices which they fear could push inflation higher.

British Retail Consortium figures show shoppers were out in force last month, with shop sales 4% higher in January than a year earlier.

The housing market is also causing concern, with house prices expected to see 14% growth this year - similar to last year - according to an economic forecast by Ernst & Young's Item club.

Many economists expect rates to rise further in the next few months but most see the peak at 6.25% or 6.5%, well below the 7.5% peak of mid-1998.

Business pleas

While an increase is now widely expected, calls have been mounting over the last week for rates to be left on hold to avoid derailing the economic recovery.

The Confederation of British Industry, the British Chambers of Commerce (BCC) and union leaders have all called for the MPC to leave rates alone.

''Economic conditions do not support a further hike in interest rates. The pound's 14-year high and the fiercely competitive business environment continue to exert downward pressure on prices, said the BCC's Dr Ian Peters.

But while many business leaders are hoping for interest rates to stay on hold, the Institute of Directors said it accepted the need for them to go up.

Ruth Lea, head of its policy unit, said: "Whilst we recognise the real burdens placed on business by higher interest rates - and their implications for the strong pound - we accept they need to rise in order to maintain the low inflation stability which is essential for business to thrive."