BUSINESS leaders last night welcomed the Bank of England's decision to leave interest rates on hold for the ninth month in a row.

The latest no-change decision by the nine members of the Bank's Monetary Policy Committee (MPC), to keep rates pegged at 4.5 per cent, had been widely anticipated.

But expectations have switched from a potential rate cut later in the year to the possibility of a rise as analysts digest a raft of more positive data from the UK economy, including the beleaguered manufacturing sector.

Andrew Sugden, policy director at the North East Chamber of Commerce, said maintaining interest rates at current levels was a sensible option for the Bank of England.

He said: "Despite some high-profile casualties, the North-East economy is on a good footing.

"Overall, our economy is performing well and a hold in interest rates will maintain stability for local businesses.

"We will be keeping an eye on input price pressures and would expect the Bank of England to respond if energy prices and raw materials costs continue to rise."

Inflation is below the Bank's two per cent target at 1.8 per cent, but the MPC will be concerned that stronger economic growth and sky-high oil prices could put upward pressure on the figure.

A quarterly report from the Bank next week is expected to give the City more clues about the next movement for rates.

Investec chief economist Philip Shaw said: "Uncertainty on the future direction is considerable at this point in time, but most evidence is pointing towards a rates rise."

But Steve Radley, chief economist at the manufacturers' organisation EEF, believed that consideration of a rate rise was premature.

He said: "With growth showing no signs of moving above trend and inflation subdued, it is far too early to start talking of increases in rates. The Bank must continue to keep its finger off the trigger until there is a stronger case for a move."