THE cost of borrowing remains on hold following a low-key final interest rate meeting for outgoing Bank of England Governor Sir Edward George yesterday.

Rates were kept at a 48-year-low of 3.75 per cent for the fourth consecutive month at the end of Sir Edward's final meeting in charge of the Bank's nine-strong Monetary Policy Committee (MPC).

Members are likely to have been influenced by recent data, particularly from the services sector, showing signs of a "Baghdad bounce" in the UK economy.

This included a report from the Confederation of British Industry earlier this week of a pick-up in retail demand, while there have also been signs of growth in new business for service firms.

Barclays Private Clients' director of investment strategy Hilary Cook said the decision was not surprising given the fine balance of the MPC last month.

She said: ''It was not surprising with the continued weak state of manufacturing in the UK, lower global interest rates and the tough state of the global economy.

"The weakness of sterling is doing the job of supporting manufacturing for now."

But business leaders warned the bank had missed an opportunity by keeping rates on hold. British Chambers of Commerce director-general David Frost said: ''Inflation may be hovering about its target, but sales in most sectors are relatively weak.

"The value of the pound may be falling, but considering the eurozone's economic performance, Britain's exports may not see a rapid improvement in sales."

Chambers of commerce have joined calls from business groups for a cut in interest rates while output growth is weak and sales are under control.

Ian McCafferty, CBI chief economic adviser, said: "This would have been a timely moment to give the economy a helping hand.

"There is little hard evidence the recovery is gathering sufficient momentum. Sterling seems to have stabilised after its sharp fall last month and in the current economic climate there is no risk of significant pressure on inflation.

"Business will now hope for a rate cut next month to drive the economy out of this sluggish spell."

Stephen Radley, chief economist at the Engineering Employers Federation, warned against complacency following today's decision.

He said: ''The weight of evidence since the start of the year has pointed to a slowdown in the UK and, while there is little the bank can do about world markets, there remains a strong case for action to promote growth and confidence at home.''