LONDON (AFX) - Interest rates are more likely to be kept on hold tomorrow following a raft of conflicting data this morning about the state of domestic demand, economists said. The Bank of England's Monetary Policy Committee, which has just started its latest rate-setting meeting, may have been encouraged by a Confederation of British Industry survey, which hinted that retail sales may finally be slowing down. However, this appeared to counter the impression given by official Bank of England figures, which showed mortgage lending soaring at a record pace. In its latest distributive trades survey, the CBI said retail sales grew at their slowest rate for 18 months in June. The CBI said the net balance of retailers reporting increased sales volumes in June fell to +16 from +25 in May. "On the face of it, this would point to a further fall in retail sales in the official data, possibly as big as 1 pct," said Credit Agricole Indosuez economist Adam Cole. "Given the sales fall in May, we would have looked for a rebound in June." This may hearten the doves on the MPC, though they will acknowledge that June's figures have been impacted by the World Cup, which may have pushed sales back into July. However, the CBI panel chairman and Boots director Alastair Eperon suggested the slowdown could be a response to other factors. "But longer lasting factors such as slowing earnings growth, stock market falls and pensions uncertainty could be making consumers more cautious," he said. With or without a slowdown on the high street, the UK consumer continues to build up debt at a record pace. Official BoE figures showed mortgage lending soaring by 6.8 bln stg, or 1.1 pct, in May -- another cash-terms record. The result was well above market expectations of a 6 bln stg rise. In addition, mortgage approvals remains well above their long term trend, even though they edged down in May to 125,000 from 127,000. The value of approvals rose 19.8 bln stg in May from 19.1 bln in April, another record. However, consumer credit rose by 1.5 bln stg, slightly lower than expected. "The robust official mortgage lending in May had been trailed by the British Bankers Association data and the highest house price inflation since 1989, but the outturn still had the capacity to shock," said Royal Bank of Scotland economist Geoff Dicks. "UK consumer demand is not slowing on its own accord," he added, noting that with mortgage equity withdrawal on the rise, some of the secured borrowing will lead out and bolster retail sales. "Anxieties about the strength of consumer demand will not be confined to the more hawkish MPC members," he said. "These data are unlikely to affect July's interest rate decision, but leave a rise in August very much on the cards." Ciaran Barr, economist at Deutsche Bank, does not expect the MPC to tighten policy in response to the surge in mortgage demand given the continued weakness of the output side of the economy, illustrated by a weaker-than-expected CIPS survey on the services sector. CIPS reported that its Business Activity index fell to a seasonally adjusted 54.9 in June from an unrevised 56.7 the previous month. This was much worse than the 57.5 pencilled in by analysts and represents a five-month low. "It remains the case that the MPC set policy for the overall economy, and to meet their inflation target," said Barr. "At this stage, the case for a rate rise is far from clear-cut."