Interest rates are almost certain to remain unchanged this week as a flurry of trading updates confirm the Christmas spending boom on the high-street, City experts said.

Analysts predict the Bank of England's nine-strong Monetary Policy Committee will leave the cost of borrowing on hold at four per cent.

The strength of the consumer sector and signs of a recovery in the global economy could even see interest rates rise towards five per cent by the end of the year.

Philip Shaw, chief economist at Investec, said: "The UK consumer appears to have remained extremely robust over the Christmas period.

"We now think that without a collapse in consumer expenditure or general and unexpected weakness from abroad, domestic rates will not fall further."

Figures from the British Retail Consortium tomorrow are likely to prove the Bank of England's fears that it needs to dampen the spending boom.

The BRC is expected to show retail sales in December were up by over six per cent, nearly double the previous year's growth.

While analysts expect consumer spending to slow after the January sales, they believe industry will at this stage begin its long-awaited recovery.

Last week, hopes of an early recovery in the US economy grew, with encouraging surveys of both the American manufacturing and non-manufacturing sectors.

And this week in the UK, the Engineering Employers Federation is expected to forecast a pick-up in activity in the engineering sector in the spring.

Business consultants BDO Stoy Hayward said while the "struggle to endure" the global uncertainty was proving hard fought, business confidence was up.

Its optimism index - a "poll of polls" - for December is 95.2, up from 94.9 in November, despite a fall in orders.

BDO Stoy Hayward partner Peter Hemington said: "The cut in interest rates has borne fruit in the consumer sector.

"I hope to see this mirrored by a continuing recovery in business confidence.

"However this should not blind us to the fact that much of the economy is in a fragile state."

The MPC, which cut interest rates from six to four per cent over the course of last year, will announce its decision for January on Thursday.