RATE-SETTERS on the Bank of England's nine-strong Monetary Policy Committee have walked an economic tightrope at this week's two-day meeting to decide the course of interest rates.

The Bank has had to weigh up the risks of lowering rates too soon and losing grip on inflation, or keeping the economic brakes on too long with higher borrowing costs - causing a sharper than expected slowdown or even a recession.

The Bank's policymakers are faced with factors such as oil prices soaring to 100 dollars a barrel, and rising petrol and food costs heaping pressure on the Bank's inflation targets.

But at the same time falling house prices have hit consumer confidence as shoppers feel less well-off, causing chillier conditions on the high street.

Yesterday Marks & Spencer reported UK like-for-like sales fell 2.2 per cent in the last three months of 2007.

It was the firm's worst performance for more than two years, sending M&S shares down 19 per cent to 401 pence.

The summer credit crunch and the Northern Rock crisis has also made banks toughen up on lending criteria - adding to the squeeze.

In November the Bank's last inflation report predicted sharply slower UK growth in the first half of this year.

But the MPC may decide that more drastic rate cuts are needed to stave off the impact of economic turbulence elsewhere, despite stronger growth in emerging markets.

Another burden on households during 2007 was soaring food bills, with poor global harvests and wet weather contributing to dairy and wheat costs.

In the year to November, official figures showed annual food price inflation running at 4.8 per cent - more than double overall consumer price index inflation, currently standing at 2.1 per cent.

Inflation would have been even higher in November if cheaper fruit and vegetables had not offset rises for cereals and dairy produce.

Robert Bryant-Pearson, chief executive of Allied Surveyors, which has an office in Bournemouth, commented: "Fear of inflation may stall another interest rate cut but I hope not.

"I hope the MPC will have the courage to accept that oil and food prices are beyond our control and that in themselves they add to the credit pressures which already threaten economic growth.

"The bold signal now would be to acknowledge the inflationary pressures but to ease interest rates by another 0.25 per cent to allow the economy some breathing space.

"Another cut now would stop housing costs getting so far out of kilter with family incomes and would prevent wholesale repossessions.

"First-time buyers would at last be able to snap up bargains in what will remain, in any event, a quiet market.

"Ironically, wage demands will be more difficult to cap if housing costs are used as the inflationary dampener."

Meanwhile, Lucy Pope, media relations manager at Bournemouth- based LV, had some helpful words of advice: "Many borrowers may still have not felt the effect of any payment relief from the last interest rate cut.

"With uncertainty of the economy over the year ahead, we would recommend consumers to review their financial position regularly, and ensure that their financial commitments are protected in the event of any loss of income."