The monetary policy committee of the Bank of England has announced no change in interest rates despite widespread predictions of further increases to come.

The bank will left rates at four per cent - although many city analysts expect an increase as early as next month.

The committee last month unanimously decided to increase rates by 0.25 per cent.

While Thursday's decision was seen by some as being seen as closer to call others had expected the bank to proceed with caution.

But the consensus suggests that rates will continue on an upward trend.

Conflicting signals

The meeting came amid conflicting signals about the overall state of the British economy.

While the economy is continuing to grow, some sectors appear sluggish.

Recent data indicated that the chancellor’s growth predictions are likely to be met this year - but some experts suggest growth could still be lower than forecast.

One factor leading to pressure for upward movement on interest rates is the current boom in house prices.

Last month's increase has so far failed to dampen the rises in house prices, although some areas in London have recorded price falls.

The Bank is aware that it must act to calm the housing market, but does not want to overreact - fearing a slump could follow.

That is thought to be behind the decision - although homeowners should expect mortgage increases over coming months. 

Welcomed

The MPC's decision was welcomed by David Frost, director general of the British Chambers of Commerce.

"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," he said.

"We urge the Bank to take a cautious approach in the coming months and maintain a favourable monetary policy for the business sector as long as it feasibly can."

And the CBI also offered its support to the decision.

Its chief economic adviser, Ian McCafferty, said: "The Bank is right to maintain its gradualist approach to rate rises. A second successive rise would have surprised business and the financial markets, undermining business confidence.

"With manufacturing joining the recovery in the service sector and consumer spending particularly resilient, we accept that rates will rise further in coming months.

"But 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."

Whilst the Bank's approach has been welcomed by industry, the city still suggests rates could rise to as much as five per cent over the coming 18 months.

The Institute of Directors warned that the Bank will increase rates soon.

"The Bank of England is keeping its powder dry for another month," said chief economist Graeme Leach.

"Following today's decision to leave rates unchanged, the only question is when, not if, interest rates will rise.

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

A factor negating the need for a rate rise, however, is inflation.

Under the chancellor’s new measure for assessing inflation, the rate of price increases remains below the government’s target of two per cent.