The Bank of England yesterday froze interest rates for the eighth month in a row... leaving pundits divided on the future.

In a widely expected move, the Bank's nine-strong Monetary Policy Committee announced it was holding rates at 4.75 per cent following its latest monthly meeting.

The no-change decision follows evidence that consumer spending remains subdued. A cooling housing market has meant many households are reluctant to spend money and this has restricted the ability of businesses to pass on rising costs, keeping inflation under control.

Very poor manufacturing output figures yesterday put a further dampener on the outlook.

CBI chief economic adviser Ian McCafferty said: "The state of the economy into the spring is not clear so a rate rise this month would have been both risky and premature."

TUC chief economist Ian Brinkley said: "Steady as she goes is the right approach. With house prices stable, retail sales cooling and manufacturing still in need of as much help as it can get an increase would have been a mistake."

At the start of the year, expectations had been for an imminent rate rise.

Indeed economists saw two MPC members vote for higher borrowing costs at the previous meeting of the committee. In March both Sir Andrew Large and Paul Tucker argued in favour of rates moving up to five per cent, while only Mr Tucker broke ranks a month earlier.

"We still think a quarter point rise will come by June," said Graeme Leach, chief economist at the Institute of Directors.

But David Frost, director general of the British Chambers of Commerce, said the underlying risks facing business, and manufacturing in particular, meant the MPC needed to persevere with a cautious stance and hold interest rates until the situation became clearer.

And Investec economist David Page said yesterday's manufacturing figures showing a 0.5 per cent drop in output in February provided the final confirmation that an immediate rate rise was unnecessary.

The publication of its quarterly Inflation Report in May could provide the springboard for more MPC members to take a hawkish view of economic direction in the UK and back a rise.

But Steve Radley, chief economist of manufacturers' organisation EEF, said inflation should remain muted as higher wage costs were absorbed by rising productivity.

Inflation has not shown any volatility recently, remaining at 1.6 per cent in February for the third month in a row.

That has seen a number of analysts argue that the BoE is done with raising rates - they have been unchanged since August - and the next move will be down.

"I believe rates will be falling by the end of the year," said Roger Bootle, economic adviser at Deloitte.

Ian Brough, chief executive of Black Country Chamber, said the fundamental economic circumstances had not changed.

He went on: "Recent economic figures have provided further support for our view that there are no powerful arguments for an immediate increase in interest rates.

"The disappointing manufacturing output figures lend further weight to the argument that rates should stay where they are.

"Any upward shift in interest rates at the moment would be a kick in the teeth. Given the underlying risks facing the business sector in general and manufacturing in particular, we strongly urge the MPC to persevere with a cautious stance and keep interest rates on hold for the next few months."

The BRC Shop Price Index for March showed that overall shop prices were 0.18 per cent lower than in 2004. Compared to a year ago, the price of food items are 1.34 per cent higher, compared to non-food item, which are 1.10 per cent lower. n The European Central Bank left its key interest rate unchanged at two per cent yesterday.