Bank faces tough call on rates

LONDON shares looked set for a positive start as the City took last-minute bets on whether the Bank of England would raise interest rates today.

The decision was the toughest for months, with economists split on whether the cost of borrowing will be lifted by a quarter-point to 4.25%.

The Bank's monetary policy committee was having to weigh a desire to slow down the housing and borrowing booms against concerns about driving the pound higher and risking choking off the fragile manufacturing recovery.

Financial bookies City Index predicted the FTSE 100 would open up 20 points at 4488. David Page at Investec said: 'Although we envisage a hardfought scrap between hawks and doves, we believe that the end result will be base rates left unchanged at 4%.'

But Bank of America's Lorenzo Codogno argued: 'While the MPC is clearly not targeting asset prices, the performance of the housing market and its likely impact on consumption cannot be ignored. We believe there is little to stop the Bank from delivering another quarter-point rate hike today.'

Tom Hougaard at City Index said that strong earnings revealed by Yahoo in the US overnight would boost the Footsie. 'The earnings season is the key to the progress of the market and the bulls are looking to finish off on a high note before the Easter break,' he said. 'This piece of news will be their rocket fuel.'

Sterling was up a quarter of a cent at $1.8445 and unchanged against the euro at 66.1p.