Interest rates set to stay at 5%

Interest rates are expected to remain at 5% when the Bank of England announces at midday the results of its latest monthly meeting.

Economists predict the Monetary Policy Committee (MPC) will decide to keep rates on hold amid concerns about the pace of inflation.

But a slowing economy and falling house prices have caused some to call for a cut in rates to boost spending.

Last month, the MPC voted eight to one in favour of keeping rates at 5%.

Rising food and fuel prices have pushed inflation to 3%, well above the Bank of England's 2% target.

That accelerating rate of inflation means that the Bank of England is unlikely to cut rates to try to bolster the flagging economy, as this could make inflation worse.

Housing slowing

This week, the economic organisation the OECD, predicted that UK growth would slow to 1.8% this year and to 1.4% in 2009.

It said the global credit crisis, the high costs of commodities such as oil and slowing property markets were all hurting the UK economy.

Problems in the housing market have driven the Home Builders Federation to call for a 0.5% reduction in interest rates.

A cut is now "imperative", it said, to alleviate "a severe housing market slowdown, driven primarily by a halving in mortgage availability".

However, economists say this is highly unlikely.

"It's difficult to envisage anything other than no change," said KPMG chief economist Andrew Smith.

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