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Last Updated: Thursday, 9 February 2006, 07:15 GMT
UK base rates set to stay on hold
Bank of England
No move is expected from the Bank
UK interest rates are set to remain at 4.5% following the Bank of England's latest rate-setting meeting despite signs of slowing High Street sales.

The Bank's Monetary Policy Committee (MPC) is expected to base its decision on signs of a sustained recovery in the housing market.

However, some economists expect the MPC to make a rate cut later this year, possibly in the spring.

The last time interest rates fell was in August last year.

A vote to keep rates on hold will come as a blow to manufacturers after recent figures from the Office for National Statistics (ONS) showed output fell last year for the third time in five years.

Doves gathering

Meanwhile, figures from the British Retail Consortium (BRC) have shown like-for-like sales on the High Street up just 0.2% in January. This was the weakest start to a year for retailers for over a decade.

Economists believe the Bank will focus on the housing market instead and it will also have data from the latest pay round to consider together with revised inflation and growth forecasts due to be published next week.

MPC member Steve Nickell has been the only one to vote for a rate cut during the past two months, but another member, Kate Barker, has recently hinted that she may join him.

"One or two additional votes for lower rates are quite possible given mildly dovish comments from Kate Barker and the dovish inclinations of David Walton and Charles Bean," said Ross Walker, economist at the Royal Bank of Scotland.

"Though it is hard to see a majority lining up against the governor in February."

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