LONDON (AFX) - The Bank of England's Monetary Policy Committee is expected to hold rates today at the conclusion of its monthly meeting despite this week's poor manufacturing and service sector figures, economists said.
They said that with consumer confidence still high in the UK, the MPC is unlikely to follow up its surprise 25 basis point cut in August with another reduction quite so soon.
Many economists predicted the MPC could lower rates in November after seeing preliminary figures for third-quarter gross domestic product.
They said Monday's Confederation of British Industry survey showing a sharp drop in confidence in the service sector and the drop in the manufacturing sector purchasing managers index to its lowest level since January 1999 have raised the prospect of a rate cut before the end of the year.
"On balance, however, a cut (today) would still be a major surprise, and given the deputy governor's apology for surprising the markets with a cut last month, remains unlikely," JP Morgan economist Danny Gabay said.
"And, of course, the consumer side of the equation continues to beat forecasts on the upside, so it is far from one-way traffic. So, as we have repeatedly argued, if there is to be another cut, the most likely date remains November, by which time the MPC will have seen the preliminary Q3 GDP report," he said.
Deutsche Bank UK economist George Buckley agreed that the imbalances between the continued growth in consumption and the contraction in investment and production would appear to rule out a rate cut today.
"In this environment, the Bank of England is unlikely to cut rates further until it receives evidence to suggest that the consumer sector is beginning to slow; rates are thus likely to be left on hold (today)," he said.
Merrill Lynch economist Ian Stewart too said a rate cut is highly improbable.
"They don't like to surprise the market. They would prefer to let the data prepare the market for any move," he said.
Stewart said last month's divisions amongst MPC members, who voted by six to three to lower rates to 5.0 pct, reduce the chances of another move in the immediate term.
In the meantime, he said, the MPC is counting on the UK consumer to offset the impact of the global slowdown. "If the consumer stops spending, then we could see more cuts, perhaps in October or November," he said.