The Bank of England has left interest rates steady at 3.75 per cent a month after it raised borrowing costs by a quarter percentage point for the first time in nearly four years.
Most analysts had predicted the central bank would choose to do nothing after it had signalled any rate increases would be gradual, and with just a week to go before Chancellor Gordon Brown's pre-budget report on December 10th.
But markets are also increasingly certain that rates are headed up in 2004, and probably by February, as the bank tries to keep inflation in check as the economy picks up speed.
The bank said last month that it expected inflation to be above its 2.5 per cent target and rising at the end of its two-year forecast period if rates are held at 3.75 per cent.
Since then, economic data have shown growth surprising on the upside, consumers piling on debt at a record pace, continued vigour in the housing market and signs of recovery in the long-suffering manufacturing sector.