Bank keeps interest rates on hold

THE BANK of England's monetary policy committee today voted to keep interest rates on hold at 4% for the seventh successive month. The decision, at the end of the MPC's two-day meeting, followed tentative evidence that Britain's shoppers are flagging and manufacturers are still struggling.

Despite house prices spiralling few economists expected a boom-throttling rate hike. A Reuters poll of 28 economists last week produced a forecast of a 67% chance that rates would be frozen at their lowest for 38 years.

The CBI urged the MPC to leave rates unchanged after reporting retail sales growth had dropped in May to their slowest pace since October 2001, casting doubt over the main force underpinning the UK economy. Also weighing on the no change side was a Chartered Institute of Purchasing and Supply report which showed its PMI manufacturing activity index fell to 52.9 in May from 53.2 in April.

The report, which is sponsored by Reuters, suggested that British industry's tentative recovery may have faltered.