THE Bank of England kept interest rates on hold at four per cent against a background of sliding stock markets and cooling demand on the high street.

The move, which will please homeowners, means interest rates have now been held at their 38-year low for the ninth month in a row.

The stock market turmoil, record low inflation and poor retail sales figures means experts have all but ruled out a rate rise in the near future.

In addition, some say the Bank could even lower rates further.

The mood marks a turnaround from last month, when observers were forecasting the Bank would move soon to raise rates to slow the booming housing market.

House prices are still buoyant figures today showed prices shot up by 2.5 cent during July, however, high street sales have shown two months of decline, indicating the spending boom is over.

Figures out yesterday gave further evidence of cooling consumer spending, showing sales failed to rally in July.

In addition, a survey yesterday showed the manufacturing sector contracted last month for the first time since January.

A number of economists are now forecasting the first rise in rates will not happen until next year giving a further reprieve to homeowners.

David Page, economist at Investec, said: "This is a surprise to no one, but the question is how long they will stay at this level. We look to next week's inflation report to give an indication on timing."

The decision was welcomed by industry leaders.

John Cridland, deputy director general at the CBI, said: "The right thing to do was nothing. There is little need for change with stock market declines, inflation at record lows and evidence that the recovery could be slower than was thought earlier in the year.

"In today's difficult climate it's no longer clear that the next move should be up. By leaving rates on hold, the Bank has avoided adding to the uncertainty."

The Engineering Employers' Federation also welcomed the decision.