Sterling held firm against the euro yesterday as the markets await the Bank of England's decision on interest rates.

At the start of play today, the pound stood at $1.88580, €1.48340 and 221.945 yen.

It is widely expected that the monetary policy committee (MPC) will hold firm on rates this month, although a surprise decision has not been ruled out.

Jonathan Said, senior economist at the Centre for Economic and Business Research, said: "We don't think that there will be a change this month. The monetary policy committee usually prefers to wait for the inflation report - so they are likely to wait until November for this to come though before raising rates."

However, Barry Naisbitt, chief economist at Abbey, said an October rise could not be ruled out completely.

He said: "I think rates will hold but I am increasingly coming to the view that I wouldn't be surprised if they were to go up tomorrow instead of in November."

"Although in saying that I have to be clear that nothing is 100 percent certain."

Mr Naisbitt added: "On balance I don't expect it tomorrow but I can't rule anything out. If rates did rise then it wouldn't be as much of shock as the August rate rise was."

Looking forward to next year, the Abbey economist claimed that the price of oil could dictate if rates fall.

He said: "We need to see the pace of global growth and global inflation which at the moment are showing signs of slowing. That may well not be completely factored into the MPC's thinking yet. The trickiest factor is the rise in oil prices. If oil prices fall, then we might get lower than expected inflation next year."

Meanwhile, the dollar made some gains as falling oil prices have led some to believe the US economy may not slow as much as predicted.