Interest rates look set to stay unchanged, possibly for the rest of this year.
That was the view widely expressed by City economists yesterday after the Bank of England left its official rate at 4.5 per cent for an eighth month. Industry reaction was mixed.
Ian Smith, chief executive of EEF West Midlands, said: "The decision to hold interest rates remains the right course of action. We currently see little justification for interest rates to move in either direction.
"The picture for manufacturing has been more positive since the start of the year and other economic data relatively stable.
"However, with evidence suggesting that rising costs from energy and pensions are weakening consumer spending and business investment, the case for a cut will become much stronger."
But the CBI maintained its stance that the cost of borrow-ing is too high.
Ian McCafferty, economic adviser, said: "We are disappointed that the Bank did not take the opportunity to provide some support for the fragile economy.
"With wage settlement restrained and the consumer cautious, the inflation outlook is benign and the economy is set to grow at less than its potential through 2006.
"We think there is room for a small cut and look to the Bank to do so if there is no sign of a pick-up in momentum in the economy."
Independent research confirmed that private-sector pay deals so far this year have been bunched around three per cent. Incomes Data Services said it expects a similar outcome for this month.
British Chambers of Commerce director general David Frost, who has fiercely championed the cause of cheaper money in the past, was circumspect. "We do not criticise the decision," he said.
"But given the risks facing the economy, we urge the Bank to consider an early cut in interest rates if economic conditions worsen."
The European Central Bank also left its main rate unchanged - at 2.5 per cent.
The price of gold broke through the $600 an ounce barrier for the first time in a quarter of a century. Gold hit $601.90 - its highest level since January 1981 - before falling back.
US crude oil futures touched a two-month high of $68.20.
In London, City analysts suggested that the Bank of England's wait-and-see stance is likely to continue while inflation remains around its two per cent target and economic growth heads back towards its 2.5 per cent trend.
Investec's economist David Page said: "We fully anticipate that rates will remain on hold for the rest of this year."
But he added that the Bank's growth forecasts may be too optimistic - pointing to a cut early next year.
"There is an underlying weakness in the UK economy and in the global economy and we think that the Bank will be forced to cut rates early next year," he said.
"I think forced is the right term because it seems that the majority of the committee do not want to. But we think that with the slower economy, the Bank will have to make a move, probably in the first quarter of next year."
Only eight members of the committee met for the April meeting after Richard Lambert resigned to succeed Sir Digby Jones as the CBI's director general.
This was the first occasion since September, 2002, that the committee was below strength. Mr King, as governor, would have had a casting vote in the event of a 4-4 tie.
Such a situation is unlikely to have occurred. Stephen Nickell is seen as the only member likely to have been pressing for a cut.