INSTANT VIEW - Bank keeps interest rate steady at 5.0 percent

LONDON (Reuters) - The Bank of England kept interest rates steady at 5.00 percent on Thursday, as widely expected.

Following are reactions from business groups and economists to the decision.

HOWARD ARCHER, GLOBAL INSIGHT

"...the future path of interest rates is currently highly uncertain as the Bank of England faces its most challenging economic environment since at least the early 1990's.

"We believe it is most likely that interest rates will stay at 5.00 percent for many months to come, as very weak economic activity increasingly contains and then dilutes underlying inflationary pressures.

"However, given that inflation is set to rise well above 4.0 percent over the coming months and is likely to still be around 4.0 percent late in 2008, the Bank of England will probably be reluctant to cut interest rates until 2009 unless the economy really falls off a cliff over the coming months."

STEPHEN ROBERTSON, BRITISH RETAIL CONSORTIUM

"No move is the right move for now. With increasing fears of recession, it's crucial the Bank pushes the economy towards better health rather than over the edge.

"Raising rates would be pointlessly kicking customers and the economy when they are down. As the Governor of the Bank of England acknowledges, almost all the increase in Consumer Price Index inflation this year is due to rising global fuel and food prices.

"UK inflation is not coming from excessive home demand and it will not be affected by keeping interest rates high. When conditions allow, the Bank's next move should be down."

JOHN HAWKSWORTH, PWC

"With inflation likely to rise even further in the later half of this year, there is little room at present for the Monetary Policy Committee to come to the rescue of either the economy or the housing market with interest rate cuts.

"Indeed, in the short term, there is a danger they may feel the need to raise rates to keep inflationary expectations and wage claims under control. However this would add to the risk of recession."

SIMON RUBINSOHN, RICS CHIEF ECONOMIST

"Today's decision by the MPC to leave base rates on hold is understandable given the ongoing concern about the inflation outlook. But the RICS still believes that the weakening economic picture, as signalled most visibly by the deterioration in both business and consumer sentiment, will justify an easing in policy later in the year.

"Crucially, given Mervyn King's remit, there is at this stage very little evidence of second round effects from the jump in food and energy costs. That said, it is not surprising that the Bank wants a little more convincing that inflation expectations are not ratcheting upwards."