Speculation over interest rates cut

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The Monetary Policy Committee (MPC) has already cut rates all the way from 5% in October to 1.5% this year - the lowest level in the Bank's 315-year history.

Analysts predict the Bank will reduce the cost of borrowing to 1% when it announces its decision at the conclusion of the meeting on Thursday.

But as rates edge closer to zero it is thought likely the Bank will resort to more unorthodox measures to combat the UK recession.

The raft of dire figures out since the MPC's last rate cut suggests the UK economy is shrinking at a faster rate than policy makers had expected.

Minutes from the last MPC meeting revealed the committee had considered the possibility of leaving rates unchanged in January amid fears about the fall in the value of sterling and to allow previous measures to take effect.

But analysts believe the news this month that the economy shrank by a shock 1.5% in the fourth quarter of last year - the biggest contraction in almost 30 years - has left rate-cutters with little option but to go further.

Howard Archer, chief UK and European economist at IHS Global Insight, said the Bank was under "intense" pressure to cut rates by another half percentage point.

"Admittedly, with interest rates already down to 1.5% further reductions are likely to have only a limited impact on the economy," he said.

"Nevertheless, the MPC is likely to conclude that the cuts in interest rates are having an effect and are beneficial overall to the economy, and that a further reduction is warranted."