Economists say the committee will adopt a "wait and see" policy until more data becomes available on key indicators such as December's retail sales figures and the fourth quarter GDP figures, which are not available until after this month's meeting.
Steve Bell, head of research at Deutsche Morgan Grenfell, said: "We think the committee will keep rates on hold this time. But if they don't move at all in January, they are likely to cut by half a point in February."
Michael Hughes, group economic adviser at ING Barings Asset Management, agreed. "It would make sense to assess the data that will come through during January and then make an adjustment next month," he said.
The MPC starts its two-day meeting on Wednesday, following last month's half-point cut to 6.25 per cent. One key factor pushing interest rates lower is the lower level of rates among the countries in the "euro zone".
British rates are expected to gradually converge with those in the euro zone where interest rates are currently fixed at 3 per cent. The European Central Bank will also meet on Thursday but is expected to leave rates unchanged.
Some economists say that the UK picture has been clouded by November's surprise rise in retail sales figures. However, the British Retail Consortium yesterday repeated its call for lower rates saying a late surge in Christmas sales should not distract MPC members from the underlying weakness in consumer spending.
Ann Grain, a spokesman for the BRC, said: "However good the winter sales are, they will not make up for what went before. Retailers have had a very poor October and November and consumer confidence is still very weak. We would still call for another rate cut."
The BRC said that anecdotal evidence suggested that while British shoppers have been out in force during the sales, it is not clear whether this has translated into a higher number of transactions. Meadowhall, the out- of-town shopping centre near Sheffield, said trading yesterday had been quieter than previous days but blamed the dip on heavy snowfall.
In London, the general manager of Selfridges, the department store, said trading had been encouraging. David Wilkinson said trading had been "phenomenal" in certain sectors. Trading yesterday was "steady" following some days of record customer footfall over the Christmas/New Year period.
The MPC will look at this week's economic surveys before reaching its conclusion. The Chartered Institute of Purchasing and Supply publishes its monthly reports on the manufacturing and service sectors today and tomorrow.
On Wednesday, the Engineering Employers Federation is expected to produce another downbeat report on business trends. Further evidence of consumer spending will come when retailers start issuing Christmas trading statements. Goldsmiths, the jewellery retailer at the centre of takeover speculation, will report its figures today.
Yesterday the company said it had no knowledge of any plans by the management to take the company private. Goldsmiths share have risen shrply in the past week on epeculation of a possible deal,
Seperately, the Manpower quarterly study of employment prospects, published today, shows that job prospects are the worst for five years. The study shows that the overall trend mirrors the last recession, with job prospects deteriorating in all three sectors - public sector, service sector and manufacturing - for the first time.Reuse content