THE Bank of England froze the cost of borrowing for the fifth consecutive month yesterday.

The decision to keep interest rates at 4.75 per cent came as no surprise to experts, many of whom believe rates have now peaked.

A cooler housing market and reports of the weakest Christmas on the high street in ten years are likely to have influenced the monetary policy committee's (MPC) decision.

An unexpected 0.1 per cent drop in manufacturing output between October and November will also have been taken into consideration.

Many analysts believe rates have peaked after five rises since November 2003.

The focus is now on whether there will be a reduction - an option the MPC discussed at last month's meeting.

Andrew Palmer, CBI deputy regional director for Yorkshire, said: "The bank's decision is no surprise.

"The economy has slowed in recent months in response to rate rises, but it is difficult to gauge from the Christmas period the likely pace of activity through to the summer.

"The bank is having to juggle the emergence of inflationary pressures, driven by a tight labour market and buoyant commodity prices, against the risk of an over-abrupt slowdown in consumer activity.

"Interest rates are likely to remain on hold for some time."

George Cowcher, chief executive of the North East Chamber of Commerce (NECC), said: "Given the underlying risks facing the economy, we expect the MPC to persevere with a flexible stance, and show readiness to cut rates if circumstances worsen."