Bank set to resist rate cut

The Bank of England will anger Britain's hard-pressed retailers this week by refusing to make a confidence-boosting cut in interest rates, say analysts.

With soaring petrol prices eating into shoppers' pockets, retailers are urging the Bank's nine-member Monetary Policy Committee to take immediate action.

'Any benefit from the quarter-point cut we had in August will have been wiped out by increases in energy costs,' said Kevin Hawkins, director-general of the British Retail Consortium. 'There is no sense from the market-place that consumers are feeling any better about life. We would hope that the MPC will seriously look at another cut.'

But economists say that despite news that GDP growth is at its lowest since 1993, fears about the inflationary impact of $65 a barrel oil are likely to persuade the Bank to wait before it makes another move. 'I think November is more likely,' said Alan Castle, UK economist at Lehman Brothers. 'But I wouldn't be that surprised if the doves put their case a bit more strongly this month.'

Hawkins's cry for help from the Bank came as the London Chambers of Commerce said business confidence in the capital had fallen in the past three months, as the tourism and retail sectors struggled to shake off the impact of the July bombings.

Manufacturing firms are also struggling in the tricky economic environment, but Steve Radley, chief economist at the Engineering Employers Federation, said he was not yet calling for a second reduction in rates.

'While the outlook for the economy remains cloudy, the Bank should keep its powder dry for the time being,' he said. 'However, the case for a further cut continues to build, and the Bank should be ready to act if signs of a more persistent consumer slowdown emerge.'