Rates decision 'in the balance'

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The Bank of England is expected to leave interest rates unchanged at 4.75% once more on Thursday - with analysts tipping a rise in November.

The bank's Monetary Policy Committee (MPC) held the rate in September.

But the MPC's surprise decision a month earlier to raise rates from 4.5% has left the markets jittery.

Recent economic data, observers suggest, indicates the economy is able to absorb another rise - which could well come as early as November.

Spending strong

The biggest factor indicating that more rate rises beyond August's are in the pipeline is the UK's stubbornly high inflation.

A potential rates move in November is certainly still flashing brightly on the radar Howard ArcherGlobal Insight

August's reading of 2.5% for the annual rise in consumer prices marked the fourth month in a row it has topped the government's 2% target.

The housing market, too, appears to be stronger than expected, with surveys in the past week from both Halifax and Nationwide indicating steep increases in average house prices.

And the UK's manufacturing - often a weak spot - showed signs of bullishness too, while retailers seemed to be benefiting from consumers' continued willingness to spend.

Despite a downward revision in the UK's growth rate in September, Global Insight economist Howard Archer said a hike to 5% was "not inconceivable".

"A potential rates move in November is certainly still flashing brightly on the radar," he added, listing house price and consumer inflation - along with signs of a return of pricing power for retailers - as key issues.

Still, there are other indicators that detract from the bullish picture.

One recent economic survey does seem to indicate a discrepancy between consumers' attitudes towards the here and now, and their expectations for the future.

42% of retailers reported better September trading

Nationwide's Present Situation Index, which gauges current feelings about employment and the economy, rose for the first time since March.

But the building society's consumer confidence survey found that faith in the future economy remained gloomy - despite picking up slightly in September.

"Consumer confidence remains low and, despite improving, has not recovered fully since the slump reported last month," said Nationwide's executive director, Stuart Bernau.

"With such mixed messages in the economy and inflation still above target, the MPC will have to decide whether to raise rates sooner rather than later."