BUSINESS leaders last night welcomed news from the Bank of England that interest rates would remain at four per cent.

The decision, which follows two increases since November, came despite continued concerns about the level of consumer debt following further growth in house prices and strong UK retail sales.

Economists predicted the move, as the bank's nine-member monetary policy committee (MPC) had already indicated its intention to raise rates gradually.

The City still expects the cost of borrowing to rise again in the next two months with a level of 4.5 per cent forecast for the end of the year.

Business leaders said the bank had been sensible in maintaining its wait-and-see approach to rates, which would help manufacturers recover after years in the doldrums.

Ian McCafferty, Confederation of British Industry chief economist, said: "A second successive rise would have surprised business and the financial markets, undermining business confidence."

Dougie Peedle, Engineering Employers Federation deputy chief economist, said the bank was right to wait and assess the impact of the past two rate rises on the consumer and on the overall economy.

Union leaders used the rates freeze as an opportunity to challenge businesses to invest in the future.

Ian Brinkley, Trades Union Congress senior economist, said: "Manufacturing firms should now match their reported optimism about order books with new investment. There is no excuse for any further delay in investing for the recovery in world export markets."