Interest rates expected to stay put

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A flurry of worrying news on the UK economy is not thought to be enough to prompt the Bank's nine-strong monetary policy committee (MPC) to move rates down when they decide on the cost of borrowing later today.

Experts have predicted that the MPC will hold rates at 5% for the second consecutive month as fears over inflation overshadow signs that the economy is slowing at a faster pace.

The no-change vote was said to be a "stone dead certainty" by Global Insight's chief economist Howard Archer, while many are even questioning if the MPC will move rates down again before the end of the year.

Inflationary pressures caused by the rising cost of food and fuel means the Bank has been left with no room to cut rates, according to economists.

But the MPC will also have to consider the mounting signs of economic weakness, with recent data suggesting that the downturn is gathering pace.

The Organisation for Economic Cooperation and Development (OECD) has slashed forecasts for UK growth, cutting predictions for GDP from 2% to 1.8% in 2008 and to 1.4% from 2.4% in 2009 amid weakening house prices and tighter credit conditions.

The figures come as consumer confidence dived last month to its lowest level for nearly 18 years on fears of a looming recession, while the Nationwide revealed a 2.5% monthly drop in house prices.

The number of mortgages approved for people buying a home also fell to a new low for the second successive month in April, according to the Bank's own research.

And data on the services sector showed activity contracting in May, with a sharp decline in outstanding business and business expectations at a 79-month low.