The Bank of England held interest rates at 5.25 per cent today but is widely expected to cut them by the middle of the year to shore up the economy.
All but one of 65 economists polled last week forecast the bank would leave rates on hold after cutting them twice in the past three months.
But another cut is expected soon as other data show house prices falling and consumer confidence crumbling as worries mount over the US economy entering recession.
Sterling edged up versus the dollar and euro, while interest rate futures slipped as some dealers had prepared themselves for the kind of surprise cut that the BoE has made in the past.
Soaring oil prices and the rising cost of food is putting huge upward pressure on inflation around the world. Policymakers are worried it could soon top 3 per cent in Britain, requiring the central bank Governor Mervyn King to write an explanatory letter to the government.
Against that, however, the credit crunch is raising financing costs for both consumers and companies.