The Bank of England is set to raise interest rates by a quarter point this week.

Ed Balls, the chancellor's closest aide, gave Gordon Brown's blessing to the move during a speech to a local government conference when he claimed that pre-emptive action worked.

"A forward-looking and pre-emptive approach to monetary policy, backed by a sound fiscal policy, is the best way to lock in stability and deliver balanced regional growth," he said.

Meanwhile, consumers embarked on a spending spree in January, according to data released yesterday.

A CBI survey suggested that retailers enjoyed their best month for sales since April 2002.