Bank of England keeps interest rate at 5%

The Bank of England will keep the interest rate at 5% for a fifth month despite the economic slowdown and ongoing job-cutting hitting the housebuilding industry.

But with reports indicating the economy is heading for recession, it is widely thought that rates may have to be cut either this year or early in 2009.

Chancellor Alistair Darling heightened concerns about the economy’s buoyancy when he said recently that conditions facing the UK and other countries were "arguably the worst in 60 years", and UK house prices recorded an annual fall of 10.9% in August, according to the latest figures from Halifax.

With house prices tumbling and high street retailers struggling, the Bank’s Monetary Policy Committee may be forced to act soon, with some analysts predicting that rates could fall as low as 3.5% next year.

The bleak economic outlook has also hit the pound, which has been falling against the dollar and the euro, and has had its worst month against the US currency since 1992.