The tenth-successive hold of interest rates was broadly welcomed by Birmingham business leaders.

But they have warned the economy is still not strong enough to cope with a rise in the near future.

James Cooper, policy a dviser at Birmingham Chamber of Commerce and Industry, said: "Businesses will be pleased the Monetary Policy Committee has again resisted calls from some quarters to raise interest rates and has held them at 4.5 per cent for June.

"A hike in rates now could seriously damage the UK economy and we are wary of predictions of a rise later in 2006. The UK economy is not strong enough to withstand a rate rise at the present time.

"Despite the fact that growth in UK has picked up in 2006, unemployment is rising and the price of equities has fallen in recent weeks.

"An interest rate cut in the current climate could have risked exacerbating inflationary pressures. The prospect of inflation is always a worry and we call upon the Bank of England to be vigilant to any significant increase in prices that may be caused by the current high cost of energy."

Peter Mathews, president of the Midlands World Trade Forum, said: "The signs are that if rates are going to do anything later this year, they will go up. This will have an impact on the ability of British businesses to trade with Europe and the rest of the world.

"The Midlands has already been affected by foreign companies closing factories in the region complaining it is not profitable to manufacture here - as we have seen with Peugeot and HP Sauce.

"A rate rise in the near future will only exacerbate that problem, making us even more uncompetitive against the emerging countries in Europe and the Far East."

David Stevens, president of Solihull Chamber, said: "Keeping the rates on hold is the right decision. The MPC did well not to give in to the clarion call for an increase from the doom merchants.

"Hopefully, the UK is in a period of steady growth and we didn't want a rise in interest rates to dampen confidence."

But Louise Bennett, chief executive of Coventry and Warwickshire Chamber of Commerce, warned that a rise in inflation, as well as recent disagreement within the MPC, could see rates go to 4.75 per cent by autumn.

Ms Bennett said: "There are positive vibes coming from the manufacturing sector despite the high-profile announcement by Peugeot to end production at Ryton. But there are still many within the industry finding conditions tough and a rise would hit them hardest.

"However, the most recent statistics suggest inflation is just edging up and that will be at the forefront of the minds of the committee."

Harvey Williams, RICS West Midlands spokesman, said: "The RICS is mindful that the downturn in the US economy is prompting calls from some quarters for Mervyn King and his team to increase the rate in future.

"However, RICS maintains its position that, although looking increasingly unlikely, rates need to be cut particularly to help business and industry in the West Midlands, following the glut of body blows recently, most notably at Jaguar, Peugeot and HP."

Ronnie Bowker, senior partner at accountants Ernst & Young in Birmingham, said: "The decision to keep rates as they are hasn't surprised me, and I believe it is correct to adopt such a cautious approach.

"Over the last month we have heard mixed messages from every corner of the business community, which is making it difficult to gauge whether the economy is in good shape or not.

"A rate rise while business confidence is finely balanced could have been damaging and may have tipped the economy in the wrong direction. I expect the committee to have an equally difficult task next month, particularly if the stock market volatility continues in its current form."