The Bank of England's decision on interest rates will dominate the minds of investors on the London stock market. "The meeting on Thursday will be the week's highlight," said Investec Securities analyst David Page. The FTSE 100 index ended Friday at 5,636.60 points, up 2.38 percent for week and at the highest closing level since June 25.
The Bank of England was expected to leave borrowing costs on hold at 5.00 percent next week as the nation faces the threat of recession and inflation well above target. The BoE's new deputy governor warned on Monday that the global financial slowdown could "drag on for some considerable time." Britain faces the threat of a recession after recent figures showed that the economy stuttered to a halt in the second quarter with its weakest performance for 16 years.
The reading of zero percent gross domestic product (GDP) growth, compared to the first three months of 2008, was revised down sharply from an initial government reading of a 0.2 percent expansion.
Britain is experiencing a prolonged downturn to its property market amid high inflation and interest rates, as well as slower economic growth and the ongoing impact of the global credit crunch.
Many cash-strapped Britons are struggling to borrow money from banks for mortgages because of the credit squeeze, which began in August 2007 in the wake of the US subprime home-loan crisis. British home builder Taylor Wimpey said this week that it had suffered a massive net loss of 1.42 billion pounds (1.76 billion euros, 2.60 billion dollars) during the first half, citing the housing market slowdown.