Conflicting figures point to no change in interest rates

The Bank of England is expected to leave interest rates on hold today amid conflicting figures on the strength of the economy.

Halifax, Britain's biggest mortgage lender, said house prices rose 1.6% in September, the biggest increase since January. At the same time there were signs of inflationary pressures in the service sector.

But the Confederation of British Industry's monthly snapshot of retail trends revealed that sales volumes grew at the slowest annual rate for 17 months in September.

While conceding that this was probably a blip due to the disruption caused by the fuel crisis, the CBI said there was no evidence that inflation was accelerating.

"There is nothing in this survey that points to a need for a rise in interest rates," said Alastair Eperon, chairman of the CBI's distributive trades panel.

City analysts said the figures pointed to another close vote on the nine-member monetary policy com mittee. But most continued to predict interest rates would be left at 6% for the eighth month in a row.

According to the Halifax the increase in house prices took the value of the average home to £86,304. Martin Ellis, group economist at Halifax, said: "We would be surprised if this was followed up by further sharp rises in the coming months." Halifax is predicting that the rate of house price rises - running at 9.2% on an annualised basis - will ease during the remaining part of the year.

Yesterday's figures gave ammunition to both sides of the interest rate debate. The Chartered Institute of Purchasing and Supply reported the sharpest increase in price pressures in the services sector for four years.

Figures published by the Engineering Employers Federation showed a bounce back in orders and output from the low reached in the second quarter but with intense downward pressure on prices and margins due to the weakness of the euro and competitive pressures.