The Bank of England has kept interest rates on hold at 5% in a move that had been widely predicted.

Despite evidence that the economy is continuing to falter - with house prices falling by 2.4% in May - the Bank is concerned about rising inflation, which hit 3% in April as high food and fuel prices took their toll.

"The Bank had little option this month other than to leave interest rates on hold," said Ian McCafferty, chief economic adviser at the CBI. "Oil and commodity prices are still of great concern and businesses are having to raise prices as profit margins get squeezed further."

The British Retail Consortium also backed the decision to keep rates on hold but the Home Builders Federation and the British Chambers of Commerce had pushed for a rate cut.