Bank of England holds fire on interest rates

The base rate of interest has been
kept at its historic low for another month as a majority on the Bank of England’s
Monetary Policy Committee worry for the health of UK economic recovery.

It means the bank rate has stood at
0.5 per cent for two years.

The makeup of the voting will be
announced on 23 March.

There was also no extension
announced to Quantitative Easing.

The MPC’s decision follows updated
GDP data, which showed that the UK economy contracted by more than first
thought in the final quarter of 2010 – by 0.6 per cent.

Last month, the 9-member panel
voted 6-3 in favour of no rate change – the majority waiting to see whether the
negative growth was a blip caused by December’s snow or a more deep-rooted

The Consumer Prices Index hit 4 per
cent in January – double the bank’s target.

Former Trade Minister Lord Digby
Jones said: “Any rise will kill a poorly performing housing sector…while
the mood music in the High Street would change damagingly”.

He also cautioned about the effect
a bank rate increase would have on sterling – potentially harming manufacturing
exporters who have helped UK growth.

Property entrepreneur Gary
McCausland was equally set against a rise – preferring to wait until after April
when the impact of Government spending cuts will be clearer.

Chief economist at the British
Chambers of Commerce, David Kern, said: “I am concerned the MPC is now
moving towards a more hawkish stance”.

He believes a rate rise is
“increasingly likely” in May but says that would be premature.


The Bank of England in London.
Photo: File