Despite this week's negative manufacturing and service sector data, most market observers believe that June will be the likely month in which the MPC would favour a cut, in line with its policy trend of a gradual rate reduction process.

Alan Clarke, UK economist at BNP Paribas, believes the Committee members, based on past voting patterns, have displayed a general reluctance to usher in successive monthly cuts in interest rates. "One reason for that is the fear that it will cause the market to extrapolate the move and price in even deeper cuts," Clarke said.

George Johns, economist at Barclays Capital, agrees with Clarke. "The UK economy is slowing, and the MPC remains concerned about the effects of reduced credit supply on aggregate demand. However, these are counter-balanced by the risk that high and rising inflation may have a lasting effect on inflation expectations," he said.

Johns feels that the recent decline in the pound sterling and news on pipeline-pricing pressures are likely to have increased the MPC's anxiety on this front. "Nevertheless, we expect that clear signs of a weakening in household demand over the coming months will lead to further policy loosening," he concluded.

However, Paul Dales, economist at Capital Economics, and Howard Archer, chief UK economist at Global Insight, believe the rate would be a close call and a May rate cut could not be ruled outright.

Dales felt the decision was "looking a closer call than a few days ago" while Archer said that another rate cut in May was a "distinct possibility" based on the recent stream of weaker economic data.

Last month's cut was the third 25 basis points cut since December and waiting another month before cutting rates would be a mistake, according to David Kern, economic adviser to the British Chambers of Commerce (BCC).

"The threats to UK growth have become more acute since the April MPC meeting with house prices recording their first annual decline in more than a decade and consumer confidence plunging to its lowest level since 1992. Major UK banks are also being forced to raise large amounts of new capital, whilst falls in commercial property prices could worsen the pressures facing banks," Kern added.

He feels UK business has so far remained remarkably resilient in the face of worsening threats and if correct policies are adopted, recession can certainly be avoided.

"A small cut in interest rates on Thursday, to 4.75%, would alleviate stresses in vulnerable areas of the economy and strengthen business confidence without taking undue risks with inflation," Kern concluded.

By Gaurav Sharma, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Cristina Markham, This email address is being protected from spam bots, you need Javascript enabled to view it