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 today because of fears that oil and food prices will force inflation above three per cent.

Ian Williams, policy director at Leeds Chamber of Commerce, said today's outcome had been expected but he urged a further cut next month.

"A small reduction today would have helped rebuild and restore business and consumer confidence and limit the potential damage to the economy," he said.

"Going forward it is vital that the MPC adopts the right policies so the damage associated with an economic slowdown can be limited - starting with a reduction in rates in June."

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.

Philip Shaw, chief economist at Investec Bank, said today's decision showed the MPC remained concerned about inflation. Bank of England governor

Mervyn King has to write an explanatory letter to Chancellor Alistair Darling if inflation rises above three per cent.

The British Retail Consortium (BRC) said the Bank of England's decision to leave interest rates unchanged heaped more pressure on businesses and individuals' personal finances.

BRC director-general Stephen Robertson said: "As last week's election results showed, the strain on personal finances is one of people's key concerns.

"I understand the Bank has the difficult balancing act of keeping inflation under control while sustaining the economy but financial indicators overwhelmingly point to a gloomy outlook."

He added: "There's little sign yet of the rate cuts since December having much effect. With interest rate changes often taking a year to work through, the sooner the Bank cuts again, the sooner and greater the relief for hard-pressed consumers and retailers."

The Bank is due to publish its quarterly inflation report next week, which should give an idea about the thinking behind its decision.