BoE keeps rates on hold

Bank of England cut rates 7 times last year in an effort to bolster the economy

LONDON, England (CNN) -- The Bank of England left interest rates unchanged on Thursday as the world's fourth biggest economy struggled to shake off a manufacturing recession.

Economists had widely expected the BoE to leave interest rates at 4 percent -- its lowest level in 37 years -- after the latest data on the state of the economy suggested a recovery was some way off.

As the BoE's Monetary Policy Committee began meeting on Wednesday, data for March showed industrial output had contracted by 0.8 percent.

Manufacturing output has now declined 1.5 percent in the first three months of the year, while Gross Domestic Product data out last week showed the economy barely grew -- up by just 0.1 percent.

The latest data "will surely make the UK MPC's job easier," economist at Bear Stearns wrote in a note to investors before the BOE's decision. "With GDP growth pretty flat and inflation comfortably inside the 2.5 percent target, there is very little pressure for higher rates just yet."

But economists do expect the BoE to hike rates in the near future to stop the economy from overheating. Consumer spending and house prices have risen in recent months, and the manufacturing and services sectors have also been showing signs of strong growth.

"Of course there are pressures building under the surface, such as the situation in the housing market, but as some MPC officials have made clear recently, this does not provide an immediate threat of higher inflation or higher interest rates," Bear Stearns said.

Last Thursday, the European Central Bank left interest rates unchanged at 3.25 percent due to the unsteady pace of economic recovery. British companies sell half their goods in Europe and about 15 percent in the United States.

But economists also expect the ECB will soon signal interest rates could rise in the next few months if the 12-nation euro zone's economic recovery picks up steam and inflation becomes more of a concern.