The monetary policy committee of the Bank of England is beginning a two-day meeting to determine its next move on interest rates.

The gathering of the committee of "wise men" follows recent speculation about a pending rise.

It is thought that the bank will raise rates by 25 basis points to four per cent when the outcome of the meeting is announced at midday on Thursday.

Recent figures showing an upturn in UK manufacturing, coupled with the rise in consumer credit and the continued growth in house prices have led to calls for a rate rise.

Whilst the new process of calculating price rises has had the appearance of dampening inflationary pressure in the economy, the City still expects interest rates to continue on an upward path over coming months.

Whilst the MPC backs a cautious approach, it has signalled that rates will rise.

Most expect interest rates to reach four per cent by the year end - and some predict they could go as far as five per cent by late 2005.