The Bank of England's monetary policy committee's decision to leave interest rates unchanged at six per cent was "not surprising", according to the Institute of Directors.

Ruth Lea, head of the institute's policy unit, said: "Manufacturing output growth is weak, the housing market has cooled and the pound is still very strong against a weak euro.

"However, parts of the economy are still buoyant and pay settlements are picking up a tad.

"And we do, on balance, expect another quarter or half per cent increase in interest rates before the end of the year."

The Confederation of British Industry has also welcomed the committee's decision.

Chief economist Kate Barker said: "This will help soothe fears that manufacturing could slip back into a downturn.

"But companies across the economy will need longer term respite as they struggle to compete in tough foreign markets."