LONDON - Bank of England policymakers yesterday decided to keep UK interest rates unchanged at 5.5 perecent. Analysts said the Bank faced a tough decision, having to balance signs of a slowdown in consumer spending against growing inflationary pressures.

The decision is likely to disappoint some retailers, who had called for a cut after poor Christmas sales figures. While rates have been held this month, many analysts expect the cost of borrowing to be lowered in February.

The Bank's Monetary Policy Committee (MPC) last cut rates in December, reducing them to 5.5 percent from 5.75 percent. A rate cut yesterday could have lifted both consumer and general business confidence, but it could also have risked fuelling price pressures driven by higher energy and food bills, analysts said. Last week, energy firm Npower increased both its gas and electricity prices and warned that its rival energy providers were likely to follow suit. Oil prices have also remain near record highs of more than $100 a barrel.

"Rising energy prices and their knock-on impact on inflation, a slowdown in the housing market and weakening retails were all factors for the MPC to consider," said Trevor Williams of Lloyds TSB Corporate Markets. "But inflation is the key concern of the MPC and they clearly wanted to wait until February's quarterly inflation report, which brings all of these factors together, for reassurance that the time is right to cut interest rates again."

"Given the uncertainty over the extent of the economic slowdown, the MPC was right to resist cutting interest rates today," he added.