The CBI has warned the Bank of England not to opt for a half point rise in interest rates when it meets later this week.

Amid widespread expectations that rates will rise when the monetary policy committee announces its decision on Thursday, the business organisation set out its backing for a gradualist approach.

While there was unanimous agreement among MPC members to leave rates unchanged in July, they were increased by a quarter point in June to stand at to 4.5 per cent.

There had been widespread expectations of a further rise of 25 basis points this week, taking rates to 4.75 per cent.

However, recent figures showing strong economic growth and further rises in house prices prompted some speculation that the MPC could come down in favour of a half point rise.

But CBI deputy director general John Cridland warned that such a move "would be a real blow to business".

He warned that the manufacturing recovery is slowing, while higher oil prices have also hit UK firms.

"The UK economy would be best served if the Bank maintained a well-signalled, gradualist approach to interest rate rises," said Cridland.

"Any surprise rate moves simply risk pushing sterling higher and further squeezing exporters' already thin profit margins."

Meanwhile, the latest BDO Stoy Hayward business trends report found that expectations among companies have dipped for the first time in more than a year.

"With an increasing interest burden, growing businesses as well as consumers could face problems," said BDO's Chris Grove.