The City is this week bracing itself for the first in a series of interest rate rises.

Analysts are predicting that rates will rise by up to two per cent over the next two years.

A recent upturn in manufacturing, coupled with the on-going consumer boom, is leading to upward pressure on interest rates.

Members of the Bank of England's monetary policy committee narrowly voted against a rate rise last month.

But this week they are expected to announce what is likely to be the first in a series of increases.

The City expects a quarter point increase as the MPC moves to dampen the credit boom.

But it is thought that the committee of "wise men" will act with caution in the early stages.

A recent explosion in mortgages and credit lending means the country is vulnerable to any shock move in rates.

Whilst the number of first time buyers has dropped significantly, the Nationwide last week revealed that house prices are still rising at a rate well ahead of inflation.

Recent increases in house prices have led to speculation of a looming property slump - with some predicting falls of up to 20 per cent in hotspots.

The MPC is also said to fear that it may overshoot its inflation target unless it takes action to curb high street excess.

Data released by the CBI on Monday revealed that retail sales grew solidly in October, rising at their fastest year-on-year rate for 18 months.

Whilst the figure for September was below expectations, retailers expect the boom continue into November and December.

The CBI's chief economist, Ian McCafferty, said: "This is a solid pick-up. The change to colder, more typical autumn weather, and good sales of seasonal ranges have boosted some traders.

"With rising house prices, low unemployment and consumers happy to borrow at record levels retailers believe this stronger growth will persist.

"After the knocks from tax rises and the Iraq war earlier in the year, this revival in consumer confidence is good news for the wider economy."

Whilst the business group expects a rate rise this week it is also warning against any significant change in approach.

"Clearly the pick up in the global economy has strengthened the case for a reversal of the precautionary cut made by the bank in July, which was intended to give the UK some insurance in case the global economy took a further turn for the worse," said McCafferty .

"But the recent recovery in the wider UK economy is in its early stages and is still fragile. The bank needs to ensure that it does not damage business confidence with a series of quick rate rises.

"The MPC must make clear that in the coming months it will not choke off a recovery that has still not fully taken hold."

Liberal Democrats called for government action against the rising levels of debt.

"With everybody warning that interest rates will rise, today's figures reinforce fears that if the consumer debt bubble busts, people are going to be left rueing their shopping sprees," said Treasury spokesman Vince Cable.

"With households getting into more and more debt, many are almost in as deep as when house prices collapsed in the early 1990s and caused so much pain to so many families.

"It is time the Government took action to protect ordinary people against irresponsible lending."