What the Bank has to weigh up next week

LONDON (Reuters) - The Bank 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 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.