Rate-setters held back from further aid for the economy today as the Bank of England paused for breath in its battle against recession.
The Monetary Policy Committee (MPC) held interest rates at their 0.5 per cent record low, with no increases in its £125bn programme to boost the money supply after its two-day meeting.
"The scale of the programme will be kept under review," the Bank said.
The move could signal the Bank is in "wait and see" mode as it judges the strength of possible green shoots in the economy, following better news from many industry surveys and the housing market.
Interest rates have plummeted from 5% last October and the Bank has embarked on so-called quantitative easing (QE) - effectively printing money - in unprecedented efforts to get the economy moving.
At the Bank's last inflation report, Governor Mervyn King said there were some "promising signs" but warned of a "relatively slow and protracted" recovery for the economy.
Rate-setters have also hinted that further stimulus may be necessary and they have permission from Chancellor Alistair Darling to create another £25bn under QE if needed - to a £150bn initial limit.
Ian McCafferty, chief economic adviser to the CBI business group, said: "There are some encouraging, if tentative, signs that the QE programme is reducing the downside risk to the economy, but monetary and lending conditions remain fragile.
"The Bank is likely to need to continue to use the QE tool in coming months."
Today's decision came as the MPC assessed a raft of conflicting data to weigh up the sustainability of any early signs of recovery.
Survey data from the UK's powerhouse services sector yesterday signalled growth returning after more than a year of declining output. This came after more upbeat signs from the manufacturing and construction sector, with decline rates easing off.
There has also been cheer from the housing market, with house price figures from the Halifax today showing a 2.6 per cent jump in prices during May - the biggest monthly rise since October 2002.
Nationwide also reported rising prices in May - the second rise in three months for the society's index.
But there have been more pessimistic signs, including figures released earlier this week showing lending to businesses had fallen by nearly £5bn during April.
This has cast early doubt over how successful the QE programme has been so far.
Meanwhile mortgage lending slumped to an eight-year low of just £2.7bn during April - the lowest figure since March 2001 - according to the British Bankers' Association.
ING Bank economist James Knightley said it was "important not to get too carried away" with early signs of green shoots.
"There are ongoing risks to the recovery story with unemployment still surging, profits plunging and credit growth at or around zero," he said.
The Bank of England is charged with keeping inflation at 2 per cent and its benchmark, the Consumer Prices Index (CPI), slid to 2.3 per cent from 2.9 per cent in April.
The MPC expects CPI to fall well below the 2 per cent target later this year, but will also be wary of the deflationary impact of the pound's recent strength, which could act as a further drag.
Some experts had predicted a further QE boost today because the Bank's own forecasts see CPI undershooting the 2 per cent target even with rates at 0.5 per cent and an extra £125bn of monetary stimulus already helping the economy.
The FTSE 100 Index was virtually unchanged following the Bank's widely-expected decision.
The British Chambers of Commerce however called on the Bank to raise the pace of its QE programme today.
Chief economic adviser David Kern said: "The positive mood in the financial markets should not lull anyone into a false sense of security. Tackling the recession must remain the priority, especially with unemployment rising and firms continuing to slash investment.
"The MPC must up the tempo at which they execute QE, while increasing the scheme's size beyond £125bn."
IHS Global Insight economist Howard Archer added that he expected the Bank would keep rates at 0.5 per cent "deep into 2010" and eventually push QE beyond its current £150bn threshold until it was sure of a sustainable recovery.
"We suspect that the Bank of England will not be unduly swayed by the latest improved data and survey evidence and will treat it with a huge amount of caution for now," he said.Reuse content