SME Business News

The Bank of England has kept interest rates at their record low level of 0.5% as it continues to inject life into the economy.

The Monetary Policy Committee also opted not to alter the £200bn it has spent so far on quantitative easing (QE) to boost the money supply.

Its decision comes in the wake of recent figures showing the UK moved out of recession faster than originally thought in the fourth quarter of 2009.

Recovery hopes were also raised by predictions from the Organisation for Economic Co-operation and Development (OECD) that UK output will grow at a faster pace than many other major international nations at the beginning of this year.

Strong manufacturing and services data have also added to the positive mood.But economists believe there are still challenges ahead for the healing economy.

The MPC will also have considered the fall in February’s rate of inflation to 3%, from 3.5% in January.

This has eased fears about pressure on the Bank for rate hikes as it looks to steer inflation to its 2% target.

Minutes from its last meeting showed some members were concerned that a weak pound and resurgent economy could keep inflation above target for longer.

But others were more concerned that the slack in the economy, dragging over from the recession, could see inflation sink below the 2% level.

Lai Wah Co, CBI head of economic analysis, said: “We weren’t expecting the Bank to change interest rates or its quantitative easing policy this month, as the MPC is waiting to see how the balance of risks to the economic outlook plays out.

“Growth in the economy looks to have held up over the first quarter, albeit at a slow rate, but there are still uncertainties about the strength and sustainability of the recovery this year.

“At last month’s MPC meeting, some members were more concerned about the upward risk to inflation from higher energy prices and weak Sterling, so it will be interesting to see how the Bank re-evaluates its inflation outlook when it publishes new forecasts next month.”