The Bank of England kept interest rates on hold at 5.75% for the fourth month in a row today, resisting calls for a cut in the cost of borrowing.

The Bank's nine-strong Monetary Policy Committee (MPC) left the base rate unchanged despite recent data pointing to growing pressure on the economy, the housing market and consumer spending.

Economists said while the MPC opted against a pre-emptive cut today, rates could come down as early as next month, with two cuts - to 5.25% - expected by next summer.

The committee's decision is thought to have been a close call, given recent economic indicators and further turmoil in financial markets.

London's leading share index closed deep in the red yesterday in response to heavy falls on Wall Street as further fears over the credit crunch shuddered through stock markets.

Tighter lending conditions in the wake of the credit squeeze and Northern Rock crisis have already forced up the cost of some mortgages.

And Halifax said today that house prices fell for the second month in a row during October, falling by 0.5% - the first consecutive monthly decline in prices since spring 2005.

Figures earlier this week from the Office for National Statistics also showed a sharp drop in manufacturing output between August and September and the Chartered Institute of Purchasing and Supply's latest figures showed a surprise softening in the service sector last month.

Just a day later, the British Retail Consortium (BRC) gave a downbeat assessment of high street spending, with its October survey finding that sales had slowed to their lowest level in almost a year.

The BRC reacted with disappointment to today's decision to freeze rates.

Kevin Hawkins, director general of the BRC, said: "It's disappointing that the Bank has failed to deliver the shot in the arm customers and retailers desperately need.

"With evidence mounting that a serious recession is looming in the US and consumer confidence and disposable incomes slipping here, the MPC should have taken pre-emptive action to avoid more serious knock-on effects to the UK economy."

But manufacturers said the Bank was right to wait before moving rates down.

Steve Radley, chief economist of manufacturers' organisation EEF, said: "While an interest rate cut should now be on the Bank's radar, it is sensible to wait for more evidence on the likely slowdown in economic growth. But the MPC should stand ready to cut rates if the world economy or confidence deteriorates significantly."

Recent comments from MPC members hinted that the Bank did not feel there were enough strong indicators of a slowing economy to signal a cut.

Inflationary pressures are also looming large, with rocketing oil prices sending the average price of unleaded petrol on the forecourts to more than £1 a litre, it was disclosed this week.

Record oil prices, combined with the rising cost of commodities and food, could start to push inflation back up over the next few months, experts have warned.

Business leaders said it would have been "unsettling" for the Bank to cut rates in the same week that the cost of oil almost reached 100 US dollars for the first time.

Institute of Directors chief economist Graeme Leach said: "The key question is whether the MPC judges the downward forces on inflation from the credit crunch and eroding consumer and business confidence to outweigh the upward pressures from 100 US dollars per barrel oil prices."

Debt-stretched borrowers will be left disappointed by the decision, having already endured five increases since last summer - adding about £80 to a typical £100,000 mortgage.

Philip Shaw, Investec chief economist, said rates will start to come down.  "Surveys and other indicators are pointing towards a slowdown in the economy and we continue to expect interest rates to fall over the coming months," he added.

But even a base rate reduction may not be felt directly by borrowers, with the credit market meltdown putting many lenders under pressure to clamp down on borrowing.

Experts said lenders were likely to delay decreasing their rates following a cut in base rates, while others are expected to pass on only some of the reduction and some may not cut their rates at all.