The Bank of England kept the cost of borrowing at 3.75 per cent after voting against a back-to-back cut in interest rates.

Economists said the recent weakness in sterling had been a factor in the monetary policy committee's decision to keep the interest rate at its present 48-year-low.

It is thought the pound's downward move could add 0.5 per cent to the Bank's two-year inflation projection.

But the Bank also considered a raft of gloomy data from across the UK economy.

In the past week, figures have shown further weakness in the manufacturing sector and a deterioration in the performance of the once-buoyant services sector.

There have also been signs of the house market coming off the boil, with the Nationwide building society reporting a sluggish 0.4 per cent growth in February - a figure contradicted by the Halifax, which reported 1.7 per cent growth.

Despite disappointment on the home front, UK manufacturers did receive a boost when the European Central Bank (ECB) cut interest rates by quarter of a point to 2.5 per cent.

Analysts believe the move could play a small part in propping up demand from firms on mainland Europe.

However, the first ECB cut in three months was less than some had expected after fears about job security helped push consumer confidence in the 12 euro countries to a five-year low.