Bank holds interest rates at 4%

The Bank of England today fixed interest rates at 4% for the 13th month in a row.

The bank's nine-member monetary policy committee (MPC) has kept rates stable since November 2001, despite mounting pressure from industry for a rate cut to protect UK industry from global economic weakness.

However dramatically rising house prices and increased levels of consumer debt - both fuelled by low interest rates - convinced the MPC to hold rates at 4%.

This week mortgage lender Nationwide confirmed house prices are still rising. Annual house price inflation in November hit 25.5%, the highest for 13 years. In addition, data released yesterday showed continued growth in the services sector.

In further support for the MPC's decision, a recent bank report projected inflation at or above the 2.5% target - set by chancellor Gordon Brown - for the majority of the next two years.

Prior to today's announcement, the Amicus union renewed its warning that more manufacturing jobs will be lost without an interest rate cut.

The union's general secretary, Roger Lyons, said: "If the MPC continues to be so cautious and put house prices in the south-east before jobs across the nation we can expect to see thousands more jobs on the scrap heap."

While the MPC refused to cut rates, the European central bank was widely expected to cut rates later today by either a quarter of half point, down from the current level of 3.25%.