Unlike any of the specialists’ forecasts, United Kingdom’s inflation rate held steady in November, showing that the Bank of England can make further interest rate cuts to encourage economic growth.

Consumer prices rose 2.1 percent compared to the same period last year according to the Office for National Statistics which released a statement today in London.

According to a survey made by Bloomberg News which calculated the median of 27 forecasts, the economic specialists had forecasted 2.2 percent, while in the month prices advanced just 0.3 percent leaving the annual rate unchanged at 2.1 percent

This makes life difficult for the policymakers who are facing a tricky balancing act as the recent rise in commodity prices means inflation looks set to remain above target throughout the next couple of months although the economy slows in the wake of the credit crunch.

"We suspect food and energy costs will continue to pose upside risks in the near term. The BoE is likely to remain cautious," stated ING economist James Knightley.

Interest rates were cut to 5.5 percent in early December by the central bank and markets are pricing in at least three more quarter-point cuts over the next as the economy slows down.

The pound also fell as several investors expected the policy makers to lower the Bank of England's benchmark rate more quickly than previously forecast and shelve concerns higher wage demands will fuel inflation.

The pound fell 0.4 percent to $2.0116 after the inflation figures.

The borrowing costs were cut by the central bank for the first time in two years as contagion from the U.S. sub prime market collapse threatens the economy.

"This has increased the chances of a rate cut. I think they'll cut in January and in February, '' said Steven Bell, chief economist at hedge fund GLC Ltd. in London, for Bloomberg.