Interest Rates Stay on Hold

Interest rates, set by the Bank of England have been held at 0.5% due to concerns over the strength of the economic recovery.

This is the 18th month of the current record low.

Interestingly, the BoE's quantitative easing also remains on hold, though this could be to counter inflationary pressures.  Last month the CPI was at 3.2%, though falling.  The Bank expects inflation to fall to close to the 2% target by the end of 2010.

Economists welcomed the news;

"The MPC made the right decision," said David Kern, chief economist at the British Chambers of Commerce (BCC).

"The tough deficit-reduction measures announced in the Budget, although necessary, will inevitably increase the threat of a UK economic setback.

"Given the precarious economic background, it is absolutely vital that the MPC maintains the current low level of interest rates until the second quarter of 2011 at the earliest."

This comes on the back of recent economic data over the strength of UK economy.

Yesterday (4th August), the latest purchasing managers' index indicated that growth in the services sector had slowed to its lowest rate in more than a year.