INTEREST rates will stay on hold until the end of the year, economists believe unanimously, as the surprising possibility that the next move may be up, not down, gains ground in the City.

At its monthly meeting, the Bank of England’s Monetary Policy Committee (MPC) is universally expected to keep rates unchanged this week at 4.5 per cent, where they have been since they were cut by a quarter of a percentage point in August.

That cut was seen by many analysts as the first of several, as inflation on the consumer price index (CPI) was at its 2 per cent target, but growth had waned. Even a few weeks ago, many economists expected rates to be cut this month.

Since then, however, retail sales data has strengthened, while the purchasing managers’ index surveys, which provide an early snapshot of activity, have continued to paint a much healthier picture of the growth rate than official figures suggest.

Meanwhile, CPI inflation now stands at 2.5 per cent, an eight-month high.

In a speech last month, Mervyn King, the Bank’s Governor, emphasised the risk of rising inflation if higher fuel prices filter through to inflationary wage deals.

Last week, a Reuters poll found unanimity among 44 analysts that the MPC will keep rates on hold this week.

Explore Economics

• Pre-Budget Report 2008

• Budget 2009

• World Economic Forum

• The Times MPC

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts