The Bank spares homeowners another rise in rates

In February the bank's Monetary Policy Committee voted to increase rates from 3.75% in a bid to rein in the housing market and temper consumer spending.

But evidence that the manufacturing sector is still struggling appears to have prevented another rise this time.

The TUC has also recently warned that 50,000 jobs could be lost by Easter if the cost of borrowing continues to increase.

The Chartered Institute of Purchasing and Supply (CIPS) published a survey on Monday which said growth in manufacturing slowed last month despite a strong January.

In February all nine members on the Monetary Policy Committee (MPC) voted to raise interest rates by the 0.25%.

'Best decision'

Reacting to the MPC's decision to leave rates alone, David Frost, Director General of the British Chamber of Commerce, said: "This is the best decision for business.

"After last month's quarter point increase we should wait and see if consumer debt and house prices stabilise before raising rates any further."

Mr Frost called for the bank to take a cautious approach in the coming months and maintain a favourable monetary policy for the business sector - for as long as it possibly could.

He added: "A supportive Budget in March is vital to nurturing recovery and to keeping interest rates low.

"Containing the Budget deficit and limiting the upsurge in public spending will make it easier for the MPC to limit future interest rates increases."

The CBI said a second successive rise in interest rates would have undermined business confidence.

"This decision thankfully recognises the need for a steady hand, especially at a time when sterling's strength against the dollar is beginning to worry exporters," said CBI chief economist Ian McCafferty.

Brief respite

However, house prices have stubbornly refused to cool off and consumer demand shows no sign of slowing despite two rate rises from the Bank of England since last November.

The only question is when, not if, interest rates will rise Graeme Leach, Institute of Directors

Mortgage lenders Halifax and Nationwide both reported continued growth in property prices, while shoppers spent more than the average during February.

So while homeowners and manufacturers can breathe a sigh of relief this time, there's every chance that another rate rise is waiting in the wings for next month or in May.

"The only question is when, not if, interest rates will rise," said Graeme Leach, chief economist at the Institute of Directors.

"Consumers and business should be aware that further interest rate rises are just around the corner," he warned.

Most City economists expect the cost of borrowing to have risen to 4.5% by the end of the year.

Revised official data showed the UK economy expanded by 2.3% last year - the strongest rate for three years - so the Bank will be keen to stop the economy from overheating.

"The decision to hold policy steady in part reflects the fact that the authorities typically like to 'bed-in' interest rate adjustments and spend some time observing the impact of the previous move," explained Simon Rubinsohn from Gerrard stockbrokers.