The Bank of England's monetary policy committee (MPC) has left interest rates unchanged at 4% for the 11th month running, despite growing pressure for a cut.

The MPC has missed an ideal opportunity

Stephen Radley, EEF chief economist

The decision was in line with expectations, with most economists predicting that the MPC would freeze rates so as to avoid fuelling a potentially destabilising house price boom.

Recent record annual house price rises have raised fears that the property market could crash in the event of a sudden economic downturn, pushing the economy into a deep recession.

But the Bank's decision came as a disappointment to the manufacturing sector, which has been calling for lower interest rates to shield the economy from an accelerating slowdown in global growth.

Trouble ahead?

"The MPC has missed an ideal opportunity to cut interest rates and help shore up the UK economy," said Stephen Radley, chief economist at the Engineering Employers' Federation.

"Manufacturing confidence has taken a battering over the summer in the face of a falling stock market and an international outlook that is clearly getting worse."

The MPC needs to be prepared to cut rates if further signs of weakness emerge

Ian McCafferty, CBI chief economic adviser

Increasingly sluggish growth in the US and Europe has cut export demand for British-made goods in recent weeks, weighing on manufacturing sector production.

The downturn in factory output has raised fears that the sector could fall into recession for the second time in as many years.

Britain's biggest business lobby, the Confederation of British Industry, said the MPC should not underestimate the risks posed by slowing global growth.

"The MPC needs to remain alive to these dangers and be prepared to cut rates if further signs of weakness emerge," said CBI chief economic adviser Ian McCafferty.

Supporters of a cut in borrowing costs also point to the UK's subdued inflation, currently running well below the Treasury's target rate of 2.5% a year.

Up and down

The MPC's job is to keep inflation within a single percentage point either way of this target rate.

There remains a good chance rates will come down next month

Philip Shaw, economist at Investec

Last year, the nine-member committee cut interest rates seven times to their current 38-year low in an effort to stave off recession, with the most recent reduction coming in November 2001.

In the spring, the MPC was widely expected to start raising borrowing costs again during the second half of the year in line with an anticipated upturn in growth.

But the chances of a rate increase receded sharply this summer as global stockmarkets went into freefall and growth in the US and Europe began to falter.

Analysts say the uncertain economic outlook means that a rate cut before the end of the year remains likely.

"If equities continue their downward trend, there remains a good chance rates will come down next month," said Philip Shaw, economist at Investec.