Economists David Owen (Dresdner Kleinwort Benson) and Richard Jeffrey (CCF Charterhouse) look forward to the MPC decision

The bank's new monetary policy will be announced at noon London time.

While trade unions and business associations have called for a cut, many economists expect rates to be held at 5.25%.

The bank's Monetary Policy Committee (MPC) voted 5-4 against lowering rates last month but said further cuts could be necessary if the pound remained strong.

MPC member Willem Buiter: Voted for a cut last month

Familiar issues will have dominated the MPC's agenda: The continued strength of sterling and retail sales figures showing a fall in high-street spending last month.

Bill Callaghan, chief economist of the Trades Union Congress, said the bank should cut rates by another half a percentage point from the current rate of 5.25%.

"There is little evidence of inflationary pressure around," he said adding that the bank should move interest rates towards eurozone levels.

In the eurozone interest rates are currently pegged at 2.5%.

Ian Pollock on how Dr Sushile Wadwani, the newest member of the MPC, will influence its decision

Ian Peters, deputy director general of the British Chambers of Commerce, said that economic data were showing "a stagnant economy, disappointing retail sales figures and exchange rate pressures forcing manufacturers to cut margins to the bone".

Therefore, he argued, the bank should "give business a chance ... and cut interest rates by a quarter percent".

Split decision

Bank Chief Eddie George is under pressure from unions over jobs

Many City economists expect the MPC to leave rates unchanged again this week because indications of how the economy is doing are mixed.

Sluggish high-street sales and problems in the manufacturing sector caused by the high value of the pound are strong arguments in favour of a cut.

But there is evidence of increased output in the service sector, and strong consumer credit growth suggests confidence is returning.

If the MPC does cut rates, analysts believe it will be cautious, shaving off only 0.25%, to 5% - the lowest level since November 1977.

Knife-edge decision

David Kern, NatWest's group chief economist, said the reported surge in the housing market may cause the MPC to delay taking action.

Liz George looks at how a change in interest rates will affect most people

But he added: "Given the growing risk that underlying inflation could fall significantly below the 2.5% target, the case for further interest rate reductions will remain very powerful."

Marian Bell, head of research at Royal Bank of Scotland, said the MPC should keep rates on hold as previous cuts in the cost of borrowing had yet to work their way through the economy.

"Monetary policy works with a very long time lag and it can take up to three years for the effect to show through," she said."

New face on MPC

The outcome of the MPC's latest meeting is further complicated by a change of personnel since the last meeting.

Sir Alan Budd, who was among the five members to vote to leave rates unchanged, has now left.

If his successor, former hedge fund director Sushil Wadwhani, votes for a cut - and all the remaining members vote as they did last month - it would swing the balance in favour of a reduction.