The Bank's battle against soaring inflation saw it vote to leave rates at five per cent, despite worsening prospects for the UK economy.

Growth stalled between April and June and the Organisation for Economic Co-operation and Development (OECD) said this week the UK would be the only major economy to fall into recession this year.

But the widely-expected decision by the Monetary Policy Committee (MPC) comes with inflation more than double its two per cent target at 4.4 per cent - and set to hit five per cent in the coming months after the latest round of price hikes by the UK's "big six" energy firms.

The furore over Chancellor Alistair Darling's gloomy comments on the UK's prospects has helped send the pound plunging against the dollar and the euro, adding to inflation pressure.

Most experts predict rates will not fall until November at the earliest when the MPC is satisfied that inflation has peaked.

Reacting with disappointment to the decision Ian Williams, Leeds Chamber of Commerce policy director, said: "Most analysts expected the Monetary Policy Committee (MPC) to keep rates on hold at five per cent today.

"But business and consumer confidence is falling and there is less disposable income available, so, a reduction in rates would have been a welcome positive amid all the stories of doom and gloom.

"We understand the MPC's concerns over inflation. But the MPC's own analysis suggests that inflation will peak in the next two to three months, and will fall sharply next year.

"With this in mind the MPC cannot wait too long before acting and we would urge them to keep a close eye on the economy and not be afraid cut interest rates in October or November."

Penny Hemming, CBI Director for Yorkshire and the Humber, said: "The bank has decided not to cut rates despite the growing weakness of the economy.

"It clearly remains concerned about inflation, which is likely to rise to just over five per cent in coming months.

"But as the autumn unfolds, the chances of a rate cut will increase, as the slowdown improves the inflation outlook for next year."