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Last Updated: Thursday, 7 December 2006, 07:48 GMT
Bank set to keep UK rates on hold
Bank of England building
Some analysts expect UK interest rates to rise again next year
UK interest rates are set to remain at 5% following the latest meeting of Bank of England policymakers.

Officials are likely to want to see whether two interest rate rises in the past four months have been enough to keep a lid on inflation, analysts say.

The Bank's Monetary Policy Committee raised the cost of borrowing to 5% in November, its highest in five years.

But minutes of last month's meeting revealed that two of the nine-member committee were opposed to the rise.

The Bank of England's most recent Inflation Report also suggested that there was little need to raise UK base rates soon.

'Small scale'

Graph showing Bank of England rate rises

Analysts said it was unlikely that monetary policies and forecasts outlined in Chancellor Gordon Brown's pre-Budget report on Wednesday would have much impact on the Bank's decision.

"The policy adjustments have been very small scale," said Alan Castle, UK economist at Lehman Brothers. "The Bank of England won't make the Treasury forecasts a key part of the discussion."

The recent strengthening of the pound against the dollar, to 14-year highs close to $2, was seen as another reason for the Bank to hold rates at their current level.

However, some economists believe that rates could rise by a further one quarter percentage point to 5.25% early next year.

While Britain's housing market and services sector remains robust, consumer spending and manufacturing activity appears to be slowing down.

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