The Monetary Policy Committee of the Bank of England announced on Thursday that interest rates will remain unchanged at six per cent for the 10th consecutive month.

Recent data has showed that the economy is cooling and reports from the Federal Reserve boss Alan Greenspan that the US economy has undergone a "soft landing".

The city now expects some modest rate cuts next year, although the MPC is unlikely to sanction any dramatic shifts.

The CBI have predicted that interest rates have peaked. Kate Barker, CBI chief economist, said: "There is now mounting evidence to support the argument that UK interest rates have peaked. Inflation pressures remain subdued and this week's data on retail sales indicates consumer demand may be softening. However, weaker sterling and the changed market view on interest rates may bring little relief to UK manufacturers because of slower global demand."