BoE expected to cut rates to 5 percent

By Christina Fincher

LONDON (Reuters) - The Bank of England looks set to cut interest rates on Thursday for the third time since December to shore up the economy in the face of the global credit squeeze.

The Bank's decision is far from a done deal, however.

Inflation has been above target since October and is likely to rise even higher soon, as a weaker pound and higher food and commodity prices work their way through the system.

Still, most analysts think the Bank will not sit on its hands with the weight of surveys pointing to slowing growth, falling consumer confidence and a sharp reversal in the housing market.

"Concerns about growth should trump inflation worries," said Andrew Smith, chief economist at KPMG.

A Reuters poll last week showed 48 of 63 economists predicting a quarter-point cut to 5 percent at the conclusion of its meeting at midday. The remaining 15 predict a cut in May.

The desire among commercial banks to hoard cash rather than lend means little, if any, of the two rate cuts since December has been passed on to consumers and businesses.

Mortgage rates for many borrowers have actually risen and the Bank's own credit conditions survey last week warned the situation could get worse.