Two-day interest rate meeting begins today

May 7 2008 By Alex Turner

BANK of England policymakers will begin their two-day deliberations on interest rates today amid further signs of a falling housing market and an economic slowdown.
But inflation fears mean the bank’s Monetary Policy Committee (MPC) is expected to keep borrowing costs steady at 5% tomorrow despite gloomy economic data.
House prices recorded their first annual drop for 12 years in April as the credit crunch tightened its grip on mortgage lending.
And wider economic indicators in the past month have also been poor, with GDP slowing to 0.4% in the first quarter of 2008 as service sector activity slows.
Survey data yesterday showed activity in the services sector at a five-year low last month, adding to the pressure for another rate cut from policymakers.
Manufacturers - who had previously weathered much of the storm - also reported weaker order books in April, with surveys indicating clouds over high street trading despite stronger official retail data.
But economists predict borrowers hoping for a back-to-back cut in interest rates from the Bank are likely to be disappointed due to inflation concerns.