The Bank of England today kept interest rates steady at 4%, a move welcomed by business leaders who had voiced fears of a rate rise.

Rates have now stayed on hold at 4% for two months in a row following a series of rate cuts last year, when the Bank shaved the cost of borrowing seven times to stand at the lowest for nearly 40 years.

This month's decision comes amid fears that rates could rise to rein in the booming trade in Britain's high streets and shopping malls.

Britain has seen a credit card-fuelled Christmas spending spree in the shops, while there have also been record car sales and rising house prices.

Some economists say fear of stoking a consumer spending splurge is expected to rule out any further cut in the cost of borrowing.

And some predict that the committee will try to control consumer spending by raising the base rate later in the year.

Last year's interest rate cuts were designed, in part, to fend off an expected collapse in consumer confidence in the wake of the September 11 terrorist attacks in the US.

But British shoppers have gone on spending, and concern is now focused on growing levels of personal debt.

Homeowners will be pleased with today's decision, as rate cuts last year knocked almost £100 off monthly repayments on a £60,000 mortgage.

But while the high street and housing may be robust, it is a different story for the recession-hit manufacturing sector which has endured thousands of job cuts - leading to persistent calls for rate cuts from business leaders.

John Butler, economist at HSBC said: "I am not surprised (with the decision) given the mixed economic data coming out of the global economy and the extremely strong UK consumer.

"In our view rates have troughed but we don't see any scope for rises until much later in the year, probably September."

Union leader Roger Lyons said the decision was a "disaster" for manufacturing workers and forecast that thousands of jobs would now be cut.