The Bank of England held interest rates steady at 5% today, in a widely expected decision as policymakers tussle with the twin evils of a slowing economy and surging inflation.
Annual inflation is at its highest - 3.3% - since the Bank of England won the power to set rates in 1997, making it hard to cut borrowing costs even though the housing market is weakening sharply and surveys point to a shrinking economy.
Britain's biggest mortgage lender Halifax said today that house prices fell at a record annual pace in June. Prices are now nearly 10% below the peak hit last August.
Despite obvious signs of a cooling economy, some policymakers considered raising rates at last month's meeting to counter the inflation threat. The BoE has said it would not be surprised to see inflation spike above 4% this year.
The bank is charged with keeping inflation at a 2% target, not to manage economic growth. The UK central bank will be hoping that a slowing economy can help to tame price pressures eventually. But there is also a growing risk of recession, and that could drag inflation too low.
By keeping rates on hold this month, the BoE is buying itself a little more time to see what interest rate path is required to bring inflation back to target over the medium term.