The Bank of England left its key lending rate at 4.75 per cent yesterday for the third month in a row and a growing number of economists now believe that the next move in interest rates will be down.
Faced with a halving of economic growth between the second and third quarters and inflation dipping further below the Bank's target, only one out of 45 analysts had expected the central bank to raise rates this month.
That represented a dramatic turnaround from a few weeks back when most still predicted a quarter percentage point hike by the year-end, following on from five increases since November 2003.
Eighteen said rates had already peaked. Others said one more quarter-point hike was still likely but probably not until February, giving the BoE's Monetary Policy Committee more time to establish whether the current slowdown was just temporary.
"The Bank was right to do nothing this month. It's clear the economy has slowed since the summer as the earlier rate rises have begun to take effect and global conditions have become more difficult," said Ian McCafferty, chief economic adviser at the Confederation of British Industry.
"Quite well how the economy performs into next year is highly uncertain, so the MPC should keep rates on hold until the outlook becomes clearer."
Short sterling interest rate extended earlier gains made on the back of a very weak house price survey as dealers braced for a possible hike covered short positions.
They awaited the European Central Bank's monetary policy decision at 1245 GMT. It was also expected to leave interest rates steady but borrowing costs in the euro zone are less than half the level they are in Britain.
Interest rates are even lower in the US, standing at just 1.75 per cent, as the British economy has recovered more quickly from the global downturn than most of its industrial rivals.
But rising expectations that UK interest rates have peaked while they are far more likely to rise in other parts of the world have sent the pound sharply lower on a trade-weighted basis in the last few months.
The MPC will have to balance the boost that this is likely to give to inflation and activity against signs that the economy has slowed even faster than expected when it releases its new forecasts in its quarterly Inflation Report next week.
Stock prices have also shot up - the FTSE-100 of leading shares hit its highest level in two and the half years this week - while bond yields have come down dramatically.
But against this easing in monetary conditions, the housing market clearly seems to have turned.
The country's largest mortgage lender said yesterday that house prices fell at their sharpest rate since the end of the dotcom bubble four years ago, and other signs point to a further slowdown in the coming months.
"It (the MPC) may start getting worried as the correction could become more pronounced than what would be desirable. With this in mind, the MPC is probably done for the current interest rate cycle," said Lorenzo Codogno, economist at Bank of America.
"The next BoE rate move will likely be a cut."