Economists are predicting that the Bank of England will keep interest rates on hold at its latest monthly meeting.

The nine-strong Monetary Policy Committee is widely expected to keep the cost of borrowing at 5.75%.

This is despite reports of falling house prices and a drop in consumer confidence, although many experts believe rates will be trimmed in early 2008, with most pencilling in a 0.25% cut for February.

The MPC is in no rush to cut rates, but it is thought to be concerned about inflation, which broke the Bank's target in October to hit 2.1% thanks to rocketing oil, commodity and food prices.

And the Bank of England governor Mervyn King recently told the Treasury Select Committee that inflation poses a serious threat to the economy.

The Bank's Quarterly Inflation Report for November suggested that rates will have to be reduced twice if consumer price inflation is to reach its 2% target in two years.

Just two members of the MPC, Sir John Gieve and David Blanchflower, voted for a rate cut in November.

And while consumer confidence has hit the buffers in the run up to Christmas, according to pollsters GfK NOP, and the housing market appears to be cooling, these are not thought to be enough for the MPC to slash interest rates just yet.

Howard Archer, chief UK & European economist at Global Insight, said: "Thursday's interest rate decision by the Bank of England is an extremely tight call as the Monetary Policy Committee juggles with a slowing economy and current rising inflationary pressures.

"While a compelling case for an immediate 25 basis point interest rate cut to 5.50% can be made, we believe it is most likely that the MPC will remain on the sidelines."

Ross Walker, UK economist at Royal Bank of Scotland, agreed, adding: "A rate cut on December 6 certainly cannot be ruled out but we continue to favour February for the first reduction.

"Whilst the economic data have deteriorated over the past month, the MPC is clearly reluctant to encourage expectations of extensive policy easing at this stage."

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