Bank set to keep rates on hold

THE Bank of England is widely expected to leave interest rates steady at 4.75% for the fourth month in a row on Thursday.

Evidence is mounting that its five rate increases so far have begun to deflate the credit boom on the High Street and in the property market.

Retailers are braced for a tough Christmas, according to the latest BDO Business Trends monitor, while the Halifax bank is predicting a 2% fall in house prices next year

Inflation, which rose to 1.2% in October, is still well below the Bank's 2% target, though soaring oil prices have exerted upward pressure on prices.

A recent reverse has prompted key Organisation of Petroleum Exporting Countries (Opec) producers to push for a cut in supply-above formal quotas. The Paris-based Organisation for European Co-operation and Dveleopment (OECD) last week warned several more rate increases may be needed next year.

Critics dismissed its suggestion, saying slower growth and the rise of the pound against the dollar added to the case for a cut.

Scepticism is widespread among economists over the rosy picture painted by Chancellor Gordon Brown in his Pre-Budget Report.

But new research by Grant Thornton shows that UK bosses remain the most optimistic in Europe and are confident of their prospects in 2005.