UK interest rate 'set to be held'

UK interest rates are expected to be held at 5%, most analysts predict, despite a flurry of downbeat data adding to worries about the economy.

The Bank of England's Monetary Policy Committee (MPC) will make its decision on Thursday after a two-day meeting.After last month's rate cut, from 5.25%, the MPC had been widely expected to hold off for now.

But this week's negative manufacturing and service sector data has led some to speculate a further cut is more likely.The pound fell on speculation that Bank might cut rates this month, though most observers still expect that the next reduction will come in June.

'Distinct possibility'

The Bank is generally reluctant to have back-to-back rate cuts, said BNP Paribas analyst Alan Clarke. "One reason for that is the fear that it will cause the market to extrapolate the move and price in even deeper cuts," he added.

However, Global Insight's chief UK economist, Howard Archer, said that another rate cut in May was a "distinct possibility".