Members of the Bank’s Monetary Policy Committee (MPC) had been under pressure to make a fourth cut in six months following a flurry of poor economic news.

City economists said they expected the next cut to be made next month, with policymakers reluctant to do so yesterday because of fears that oil and food prices will force inflation above three per cent.

The bank faces a delicate balancing act between controlling inflation and maintaining economic growth.

Data earlier this week revealed that activity in the services sector slowed to its lowest level since March 2003 as firms such as banks, hotels and restaurants felt the force of rising costs and a downturn in new orders.

There was also a shock fall in manufacturing output in March, with a 0.5 per cent decline surprising analysts who had forecast manufacturing production to remain unchanged during the month.

Further pressure was piled on the MPC after the property market showed further signs of a downturn.

House price growth turned negative during April for the first time since February 1996, with UK house prices now 0.9 per cent lower than they were in April last year, according to data out last week from Halifax.

David Blanchflower, one of the MPC’s nine members, made his feelings known last week after saying “aggressive action” was needed to prevent the UK economy falling into recession.

Philip Shaw, chief economist at Investec Bank, said yesterday’s decision showed the MPC was still concerned about inflation.

“We are not surprised that the MPC has kept rates on hold at five per cent,” he said.

“While there has been a degree of poor economic news, the committee remains concerned over inflation and believes the relative weakness of sterling will provide the economy with a degree of stimulus. We think it is most likely that the MPC will lower rates again next month.”