Interest rate decision looms

The Bank of England's monetary policy committee is to announce at midday whether interest rates will rise again.

A majority of economists predict there will be no rate increase this month, given growing evidence of lower inflationary pressure.

But some say the decision will be a close call.

The nine MPC members started their monthly interest rate policy meeting on Wednesday.

During the course of the two day meeting they look at all aspects of the UK economy's performance before deciding on an interest rate change to ensure that inflation remains close to 2.5%.

Manufacturers trying hard to stay afloat will be keen for interest rates to stay the same for another month

TUC's Brendan Barber

Underlying UK inflation is currently at 2.2%.

If the MPC does decide to keep interest rates on hold, it will be the sixth month in a row it has done so.

The European Central Bank's council also meets on Thursday for the last time before its four-week summer break.

It too is expected to keep interest rates on hold despite renewed weakness in the common currency.

Mixed messages

The committee does have a mix of conflicting data to digest.

There is evidence of lower inflationary pressures.

Official figures showed average earnings growth fell to 4.6% in May from 5.1% in April.

House prices too seem to be easing.

The Royal Institution of Chartered Surveyors reported a slowdown in house price inflation in the three months to June while Nationwide said prices were down 0.2% in July.

Oil prices too have fallen from their highs earlier this year.

However, the British economy does appear to still be growing strong.

In the second quarter, GDP was up 0.9% from the previous three months.

On Wednesday, the CBI's distributive trades survey reported shop sales had picked from what had been a poor June.

But the pace of growth was still slower than it was in the spring.

Union pressure

The Bank of England also faces pressure from unions to keep rates on hold.

Industry badly needs a "stretch of stability" with interest rates on hold to help bring down the pound's value, a report from the Trades Union Congress said on Thursday.

According to the report, 95,000 jobs were lost in the year to May.

TUC deputy general secretary Brendan Barber said: "Manufacturers trying hard to stay afloat will be keen for interest rates to stay the same for another month."

"Although in the long term rates must begin to fall again, a stretch of stability is the best bet for this struggling sector," he added.