Interest rates kept on hold despite house price surge

Businesses breathed a sign of relief yesterday after the Bank of England's Monetary Policy Committee decided not to repeat August's unexpected decision to raise interest rates. Although the decision had been unanimously predicted in the City, a batch of upbeat data had triggered last-minute nerves that it would move again.

Analysts are still split over whether the MPC will raise rates again this year to curb inflationary pressure from growth above trend, inflation above target, strong money growth and high energy prices.

The British Chambers of Commerce welcomed the decision and urged the MPC to resist calls for another increase. "Raising rates further at this time would seriously damage business confidence and could well push the recovery into reverse," Sally Low, its head of policy, said. But Graeme Leach, chief economist at the Institute of Directors, said: "We are not out of the woods yet. The inflation genie isn't completely out of the bottle, but his head is sticking out of the top."

The decision came hours after Halifax said the price of the average home rose 1 per cent last month. The increase - the largest since April - took the price of the typical property to £179,043, up £1,853 on the month.

Analysts described it as a "robust" rise, but Halifax played down talk it marked a fresh mini price boom.