The Bank of England cannot rule out a surprise move in interest rates, a member of its Monetary Policy Committee will say today.
Marian Bell, one of the nine economists who set rates every month, will say the MPC is determined to ensure inflation stays close to its 2 per cent target.
Her comments come in the wake of a fresh batch of poor economic data, adding to fears the economy is entering a downturn that will eventually force the Bank to cut rates.
Analysts believe the Bank is in a quandary, caught between its forecast for inflation to rise above 2 per cent in a matter of months and signs of weaker growth.
Traders are on tenterhooks for further clues to its thinking, with Mervyn King, the Governor, also making a speech today. Tomorrow sees the publication of the minutes of the latest MPC meeting and a speech by the deputy governor Andrew Large.
In a speech later today, Ms Bell will concentrate mainly on the Bank's communications with the markets, insisting the MPC "does not spin". But she will say: "It would seem that no matter how clear the MPC might be in communicating, asymmetric information and knowledge will mean that surprises cannot be entirely eliminated."
Financial markets have done a 180-degree turn in recent weeks from a forecast of two more rate rises to their current view that the next move will be a cut.
The pound fell almost a cent yesterday, dropping below $1.84, after a report by the property website Rightmove that house price inflation had fallen to its lowest level in a decade.
This morning a survey from the Royal Institution of Chartered Surveyors shows homeowners rushed to put their properties up for sale last month despite a fresh drop in prices and sales volumes.Reuse content