The Bank of England today resisted calls to make its first back-to-back cut in interest rates in nearly seven years as the threat of rising inflation persisted.

The monetary policy committee was under intense pressure to follow up last month's cut with another today but instead voted to keep rates at 5%.

It disappointed millions of households desperate for cheaper mortgages and the City, where hopes of a cut rose this week after a blizzard of dismal economic news.

But a majority of the MPC were more concerned about the threat of rising inflation, which looks set to breach the critical 3% level in the coming months. That would force Bank Governor Mervyn King to write a letter of explanation to the Chancellor. The City now expects a cut to 4.75% in June.

Peter Spencer, chief economic adviser to the Ernst & Young Item Club, said: "Today's vote was probably very close given the conflicting indicators on the economy and inflation. Although the hawks appear to have won the day this time, the doves will have had plenty to argue about."

The European Central Bank kept interest rates at 4% to counter itsworries about inflation on the Continent.

Significantly for the City, the MPC saw the latest inflation figures for April which are due out next Tuesday. Analysts said today's decision suggests the figures made pretty grim reading for the Bank. Inflation is at 2.5%, well above the 2% target, and is being driven higher by the rising cost of food, petrol and household bills. Oil has soared to record highs of above $120 a barrel in recent days.

Howard Archer of Global Insight said: "Current elevated inflation levels and risks deterred the MPC from cutting interest rates for a second successive month despite mounting signs that the UK economic slowdown is deepening and widening amid tighter lending conditions."

Philip Shaw of Investec added that the MPC has an "aversion" to back-to-back rate cuts "on the grounds that this could boost inflation expectations".

The last time it did so was after the 9/11 terrorist attacks on America in 2001 when it cut rates at an emergency meeting in September and again in October and November as the world economy faced crisis. Although there are signs the economy is slowing, with everything from the housing market and the High Street to manufacturers and the key service sector suffering, interbank lending rates are on the slide. So-called Libor, which touched 6% this year, today eased to 5.78438% as the credit freeze showed further signs of thawing.

THE COMMITTEE'S DILEMMA

Arguments for a cut
• Economic growth slowing
• House prices falling for first time since 1990s
• High Street meltdown as sales dive
• Manufacturing output at a six-month low
• Service sector worst for five years

Arguments against a cut
• Inflation above Government's 2% target at 2.5%
• Oil at $122.91 a barrel
• Food price inflation of 4.7%
• Petrol at £1.10 a litre
• Household energy bills top £1000 a year