The Bank of England yesterday decided to keep interest rates on hold at 5%.

The decision by the Bank's Monitory Policy Committee comes despite rising inflation and growing expectations of an economic downturn. It follows a two day meeting by the nine-member committee.

In holding interest rates at the current level the Bank has resisted pressure to ease the cost of borrowing as it focuses on its stated aim of keeping inflation, currently at 3.3%, under control and back in line with the 2% target set by the UK Chancellor.

This follows a survey by the British Chamber of Commerce earlier this week which showed that sales, orders and confidence across the services sectors are at their lowest point since the last recession in the early 1990s.

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Commenting on the move to hold rates Liz Cameron, Chief Executive of Scottish Chambers of Commerce, said: "This decision to keep interest rates on hold is not unexpected and demonstrates the increasingly fine line in which the Bank of England is having to tread in order to balance its duty to control inflation with the need to promote economic growth.

"Scottish businesses are feeling a number of pressures from rising energy costs, rising transportation costs and the high cost of raw materials. Business confidence has taken a hit this year and it is important that we keep the Scottish economy on track.

"Despite recent gloomy reports there remains much to celebrate in the Scottish economy and next week we will be looking forward to the publication of Scottish Chambers of Commerce's latest quarterly business survey, which will be a timely check on the health of Scottish business."

(GK/JM)