LONDON (Reuters (LSE: TRIL.L - news) ) - The Bank (TBHS - news) of England looks set to hold interest rates steady for the third month running next week as policymakers seem trapped between high inflation on one side and sharply slowing growth on the other.

All 72 analysts polled by Reuters this week predicted the central bank's Monetary Policy Committee would leave rates at 5.0 percent when it finishes its two-day meeting on Thursday.

Policymakers have described the current mix of commodity price-driven above-target inflation and an economic downturn as creating the most challenging conditions in more than a decade and uncertainty abounds over the next rate move.

Financial markets are pricing in a good chance of rates going up this year -- a few MPC (A050540.KQ - news) members considered a rate hike last month -- but a significant number of economists say the Bank will cut rates sometime in 2008 to revive a slowing economy.

Below is a list of some factors the MPC will be looking at when it meets to decide on rates.

INFLATION

Inflation hit 3.3 percent in May, its highest level since the current series began more than a decade ago.

That forced Bank Governor Mervyn King to explain himself publicly to the government as required by the central bank's remit if inflation rises above the 2 percent target by more than a percentage point.

It is expected to go higher still thanks to soaring petrol prices as the cost of oil hit new record highs above $140, and could soon touch 4 percent.

The Bank expects slower growth, however, will bring down price pressures and bring inflation back toward the target over a two-year horizon -- the time its takes for monetary policy decisions to work their way through the economy.

HOUSING MARKET

House prices have been falling and are now 6-7 percent below the peak last year. Many analysts are now predicting sharper falls by the end of the year as mortgage approvals have dropped dramatically as cash-strapped lenders tighten up credit terms.

GROWTH

Economic growth slowed to just 0.3 percent in the first quarter and while consumption held up reasonably well, a big drop in the saving ratio to the lowest in half a century augured badly for the future.

The PMI surveys, meanwhile, have been pointing to sharply lower growth in Q2 and perhaps even a decline with the manufacturing and services reports showing contractions.

RETAIL SALES

May's retail sales figures were shocking. They showed an unprecedented jump of 3.5 percent when most analysts had been expecting a fall. While the hot weather in May undoubtedly boosted sales, many analysts have been questioning the veracity of the report.

MARKET CONDITIONS

Market tensions continue while expectations of higher official rates mean borrowing rates have been rising, effectively slowing the economy without central bank action.

The stock market has fallen sharply over the past month while the trade-weighted sterling index has been fairly steady.