The Bank of England today held interest rates at 4.5 per cent for the eleventh consecutive month amid expectations the next move in the cost of borrowing will be up.

The City fully expected the decision, with George Buckley, the Deutsche Bank economist saying this morning that "there appeared little doubt among market participants that the [Monetary Policy Committee would] announce unchanged rates."

The European Central Bank also held eurozone borrowing costs, at 2.75 per cent.

The ECB has hiked interest rates three times since December, each time by 0.25 per cent. It is tipped to do so again as early as August amid signs of stronger growth and inflationary pressures in Europe.

On UK interest rates, two out of nine experts on The Times Monetary Policy Committee today backed an immediate rise, with most of the remaining panel members now leaning towards an eventual hike.

For more details on how and why the The Times MPC voted click here.

The increasingly hawkish stance from The Times panel comes against a background of recent solid economic data.

Economists widely regard the most significant figures over the past month to be last week's National Accounts' revisions, which revised upwards GDP growth for the past five years.

Meanwhile, official figures released today showed that British manufacturing output rose faster than expected last month. The Office for National Statistics said manufacturing output rose 0.5 per cent in May compared with analysts’ forecasts of an increase of 0.3 per cent.

Howard Archer, the Global Insight economist said: "The healthy rebound in manufacturing output in May following April’s relapse provides welcome reassurance that the sector’s recovery remains intact."

However, there were also signs this morning that the housing market is cooling, with the Halifax announcing that house prices fell 1.2 per cent last month, the steepest fall in nearly six years.

In May, the Bank warned that inflation would be above its 2 per cent target in two years if it did not raise interest rates. But more recent comments from the Bank’s governor Mervyn King suggested he is comfortable with the Bank's "wait-and-see" stance.

Last week Mr King told the Treasury Select Committee that inflation was still close to target at 2.2 per cent and added that he did not think there had been much change in conditions since May when the MPC voted to keep interest rates on hold.

He added that despite soaring energy costs, core inflation, which strips out volatile energy and food factors, remained relatively benign while wage growth remains muted.

The Times MPC backs no change

Ahead of the Bank of England’s base rate decision, Sushil Wadhwani was the only member of the independent Times panel still to argue that an interest rate cut remains firmly on the agenda.

But even Dr Wadhwani, a former member of the Bank’s own MPC, did not back a change in rates this week, having advocated a cut in each of the past five months.

Both Martin Weale, director of the National Institute of Economic and Social Research, and Rupert Pennant-Rea, chairman of Henderson, the investment group, and a former Bank Deputy Governor, voted for a second month in a row for higher rates.

Among the other six Times MPC experts, most suggested that it now seemed likely that borrowing costs would eventually need to rise, given increasingly robust economic conditions. The panel was split, however, over the implications of the recent upward revisions to official GDP growth data over the past five years.

Some felt this strengthened the case for higher rates, while others believed it showed that the economy may be able to expand more strongly without sparking inflation than previously thought.

The MPC is currently two members short, with only seven debating interest rates, following the departure of Richard Lambert to the CBI and the sudden death of David Walton last month.

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