Disappointment, but little surprise, was the over-whelming response in the West Midlands yesterday to the Bank of England?s decision to leave its official interest rate unchanged for a tenth month at 4.75 per cent.

Evidence that the malaise in manufacturing is spreading to the service economy, along with weakening retail sales and rising credit card arrears, has changed the outlook for interest rates so that many economists now confidently predict that the next move will be down.

Peter Mathews, president of the Midlands World Trade forum and chief executive of Black Country Metals, is among those who see no reason why the first cut could not have come yesterday.

?What a surprise,? he said. ?The Bank?s Monetary Policy Committee sits and watches manufacturers struggle.

?The climate has become even more gloomy since the ?No? votes in France and Holland, but still the MPC does not drop rates to fight against the weakened euro that gives continental competitors the edge. Reducing rates in July or August to bring us into line with the European economy could be too late.?

At Birmingham Chamber of Commerce and Industry, policy director Jerry Blackett pointed out: ?The latest figures on retail, factory output and oil prices point towards a cut in rates, but it is obvious MPC members were worried that a reduction would refuel a house price boom.

?Freezing rates for the tenth month running at least allows for stability in business planning, but there is little doubt manufacturing and the service sector need the impetus of a rate cut to push them out of the doldrums. The predictions are that the MPC will reduce rates in August. That may be too late to stop retail and the manufacturing economy sinking even further. July should be the target.?

David Stevens, president of the Solihull Chamber, agreed. ?It would have been a telling move if the MPC had cut rates by even as little as one quarter of one per cent,? he said.

?It would have given the impression that the committee was considering the difficulties being faced by companies in the real world.?

The Bank raised interest rates five times between November 2003 and last August which checked house prices and persuaded many personal borrowers to start paying off their debts. Credit card borrowing slowed to its lowest level for nearly four years in April.

The CBI said yesterday?s no-change decision should shore up business confidence.

Chief economic adviser Ian McCafferty stressed: ?We must avoid talking ourselves down, as the outlook is still for continued, if somewhat more modest, growth.? At the EEF, chief economist Steve Radley welcomed the decision while indicating that the case for cutting rates in the coming months had strengthened.

?Business would not want to see a cut in rates that had to be reversed soon afterwards,? he said. ?However, if the current stutter in the economy turns into a stumble, the Bank must act decisively.?

Talk of manufacturing falling back into a recession is premature, Mr Radley stressed, though there are signs of tougher times ahead if consumers continue to tighten their belts and the eurozone remains sluggish.

British Retail Consortium director general Kevin Hawkins, who has been calling for a quarter-point cut, voiced disappointment.

?We urge the MPC to keep all the main indicators of economic activity under close review over the next few week as the downside arising from the weakness in consumer spending is growing week by week and will spread to currently unaffected parts of the economy,? he said.