LONDON, Nov 30: Britain’s central bank is likely to leave its key lending rate unchanged at 4.0 per cent at its monthly policy meeting next week as robust consumer demand suggests the UK will manage to steer clear of recession.

Of 27 economists polled by Reuters this week, 24 said the Bank of England’s Monetary Policy Committee (MPC) would leave rates on hold at its last policy meeting of the year. Three said the MPC would cut rates by a quarter point.

The Bank has lowered rates seven times this year from a peak of 6.0 per cent in an attempt to protect the economy from the threat of global recession.

MPC members quizzed in parliament this week were relatively confident that Britain would not succumb to the same fate as Japan, the United States and the 12-nation euro zone, all of which are now thought to be in or on the brink of recession.

Bank of England Governor Sir Edward George described the likelihood of the UK also drifting into recession as “a very, very small chance.”

George and the other eight MPC members start their meeting on Tuesday and will announce their decision at 1200 GMT on Wednesday.

These are some of the factors they are likely to weigh up at the meeting.

A panel of economists from the National Bureau of Economic Research said this week that the U.S. economy slipped into recession in March, ending a 10-year-long expansion.

Data due out on December 7 is expected to confirm that Japan has now recorded two successive quarters of contracting GDP — the technical definition of recession.

And economists are now predicting that the 12-nation euro zone will be in recession by the end of the year or early next year after recording virtually stagnant growth in the third quarter.

While the outlook for the global economy is gloomy, it is probably no worse than when the MPC drew up its quarterly Inflation Report earlier this month and several bank officials have expressed confidence that it will begin to turn around after the middle of 2002.

Inflationary presures in the UK remain very subdued with the core inflation rate, RPIX, steady at 2.3 per cent in October, below the government’s 2.5 per cent target.

Falling oil prices and lower mortgage rates are expected to drive RPIX lower in coming months, although the Bank of England’s quarterly Inflation Report this month highlighted the upward risks to inflation should sterling depreciate sharply.

Mass job layoffs in manufacturing finally began to take their toll in October with the claimant count rate of unemployment edging up to 3.2 per cent from a 26-year-low of 3.1 per cent.

With many service sector firms also starting to lay off staff to reduce costs, economists expect unemploynment to push steadily higher in coming months.

But more recent survey and official data have pointed to something of a rebound in sentiment. Confidence measures have now recovered to the same level they were at prior to the September 11 US attacks and perceptions of the state of personal finances remain particularly strong and are expected to fuel healthy Christmas sales for retailers.

Chancellor of the Exchequer Gordon Brown upped the ante in his annual pre-Budget report this week, indicating a firm intention to significantly increase public spending on services, particularly health, and to fund that through tax rises.—Reuters