The Bank of England is expected to leave interest rates unchanged for the ninth month running this week.

The Bank's Monetary Policy Committee (MPC) will announce the decison at 12 noon on Thursday.

Earlier, the bank had been expected to raise rates during the second half of the year to cool a red-hot property market and curb persistently high consumer borrowing.

But the chances of an imminent rate rise have receded sharply following a string of tepid economic data in recent weeks.

Economists now say the stockmarket slump and slowing retail sales are likely outweigh the MPC's concerns over galloping house prices, despite a survey from mortgage lender Nationwide showing that annual house price inflation is running at a 13-year high.

Consumer doubts

"Further ahead there is much uncertainty over the course of equities and their effect on the real economy. We think that UK rates will remain at 4% until early 2003," said Philip Shaw, chief economist at Investec Bank.

London's benchmark FTSE 100 share index, hit by doubts over the reliability of corporate accounts in the wake of the Enron and Worldcom scandals in the US, has lost about a third of its value so far this year.

The decline has eroded pensions and dented consumer confidence, contributing to the first back-to-back slowdown in monthly retail sales since 1998.

Slower retail sales could spell trouble for the economy, which depends on consumer spending for two thirds of its activity.

On Wednesday, a closely-watched survey from the Confederation of British Industry confirmed that activity on the High Street had slowed in July.

"The retail sales boom seems to be over. Despite continuing price cuts and stiff competition on the high street, consumers are spending less," said Alastair Eperon, chairman of the CBI's distributive trades survey panel.

Price pressure eases

Record low rates of inflation, reflecting cheap oil and seasonal food prices, and a sharp fall in consumer borrowing have also eased pressure for a rate rise.

The latest figures show that underlying inflation fell to a 27-year low of 1.5% in June, while consumer borrowing dropped by �200m to �1.3bn.

Simon Rubinsohn, chief economist at stockbrokers Gerrard, said the lower borrowing figures will provide the MPC with "further justification, if any were needed, to hold policy steady at this week's meeting."

Surprise weakness in the US economy, which grew by a lower than expected annual rate of 1.1% between April and June this year, will further undermine the case for higher rates in the UK.

Extensive transatlantic trade and investment links make the UK vulnerable to economic downturns in the US.

Rate cut?

Some economists have even called on the MPC to consider cutting interest rates, citing a dip in business confidence and weak economic growth prospects.

"We think the right thing to do is to cut interest rates by a quarter point. Confidence needs to be encouraged to ensure steady growth," said Peter Hemington, partner at accountancy firm BDO Stoy Hayward.

Last year, the MPC cut rates by two percentage points to their current 37-year low of 4% in an effort to stave off the worst of global economic slowdown.

The most recent rate cut came in November 2001.