The Bank of England has left interest rates on hold, balancing the rising cost of commodities against calls to aid economic activity.

Commenting on the decision by the Bank of England’s Monetary Policy Committee (MPC) to keep interest rates on hold at 5.0%, Ian McCafferty, the CBI’s chief economic adviser, said: "The Bank had little option this month other than to leave interest rates on hold - oil and commodity prices are still of great concern and businesses are having to raise prices as profit margins get squeezed further. We have yet to reach the peak in inflationary pressure, even though we still expect the rate of inflation to fall back markedly through 2009."

Steve Radley, chief economist of the EEF, came out in support of the Bank: "Given the current extent of inflationary pressures, the Bank faces an unenviable dilemma in balancing further signs of weakness with growing concerns over inflation. But unless it becomes clear that the economy is deteriorating sharply, the Bank is right to continue its cautious approach."

However, David Kern, economic adviser to the British Chambers of Commerce issued a note of caution: "With annual CPI inflation set to increase shortly above 3 per cent, most analysts have predicted correctly that the MPC would refuse to cut rates in June. We understand the critical need for the MPC to maintain credibility but the MPC cannot disregard the worsening threats to growth."