Business leaders in the West Midlands welcomed the as-you-were decision on interest rates but fear an increase before the end of the year.

James Cooper, policy adviser at Birmingham Chamber of Commerce and Industry, said there was concern that the Bank of England Monetary Policy Committee may have already made up its mind to raise them next time around.

He went on: "Businesses appreciate that the Bank of England's main task is to keep growth in UK prices under control.

"We are concerned that inflation, which stands at 2.5 per cent, remains over and above the Government's two per cent target, largely as a result of the high cost of energy and raw materials we have seen throughout most of the year.

"However, firms look to the bigger picture and regard the current economic climate as a challenging one. High interest rates continue to keep the pound strong against its rival currencies, which is making life difficult for all UK exporters.

"While we are encouraged by the fact that energy prices have abated in recent weeks, high energy costs have eaten into margins and it has often been difficult to pass them on to customers.

"Birmingham business values stability. As such, we are satisfied that interest rates have been pegged and call for them to remain at 4.75 per cent for the foreseeable future.

"A further interest rate rise would hinder rather than help our economy at this stage."

David Stevens, president of Solihull Chamber of Commerce, said: "It is a relief that the MPC saw fit to hold back on any rise in interest rates, it gives manufacturing time to build a little more on its recent stabilisation and the service sector to move further ahead.

"But house prices have risen faster than anticipated over the last couple of months and annual price inflation in the high street has gone up over the last three months.

"And that means that business should brace itself for an increase before the end of 2006."

Peter Mathews, Black Country businessman and president of the Midlands World Trade Forum, cautioned: "I've always believed we are getting nearer and nearer to Europe - the UK's biggest market - and if that's the case, our interest rates should be closer to those in euroland.

"Unfortunately, this is not the case at present and our high interest rates, coupled with a strong pound, are putting up unnecessary barriers to out most important market and harming the prospects of the region's exporters."

David Waller, Midlands chairman of accountants PricewaterhouseCoopers, said: "While there has been some good news coming out of the economy, with productivity levels higher than expected in the second quarter, it isn't cause for a further increase in the base rate at this point.

"To maintain any level of competitive edge, manufacturing industry is operating in extremely tough conditions and must be given space to see sustainable growth in the longer term.

"As we approach the winter months, the pressure will be increasing on the High Street for a strong Christmas performance and, with high gas and electricity prices putting a strain on household budgets, a further increase in the base rate could dampen the festive season for retailers."

Gary Cowdrill, of professional services lobby group Birmingham Forward, said: "It would have been premature to have changed this time around - it makes sense to wait and review the impact from the August increase."

Ronnie Bowker, senior partner at Ernst & Young in Birmingham, added: "While I appreciate the difficulty of the MPC's role in keeping inflation low, I urge the committee to consider the real possibility of an economic slowdown next year, which combined with high interest rates could cripple weaker parts of the region's economy." Harvey Williams, spokesman for the Royal Institution of Chartered Surveyors, said: "Unfortunately, the threat of a rise in the base rate still remains a strong possibility.

"RICS would ask Governor Mervyn King to act with caution in the final months of the year."

Louise Bennett, chief executive of Coventry and Warwickshire Chamber, said she was not convinced that a November hike would be the best course of action.

"But if there is a rise in November it has to be given plenty of time to kick-in because business conditions are still tough and I don't believe a rate of more than five per cent is going to help anyone."

Ian Brough, chief executive of Black Country Chamber of Commerce, said such an increase "could prove disastrous".

He added: "Businesses need stability and support, not another kick in the teeth."