Business

UK interest rates held at 0.5% by Bank of England

Bank of England building
Image caption One MPC member favoured a rate rise to combat inflation in the past six monthly meetings

The Bank of England's Monetary Policy Committee (MPC) has kept UK interest rates on hold at 0.5%, and unveiled no new quantitative easing (QE) measures.

Both decisions were expected, but it will not be clear whether they were unanimous until the minutes of the meeting are released.

At the MPC's November and October meetings, there was a three-way split among its nine members.

In those meetings, one member voted for a rate rise, another for more QE.

The most recent figures showed that Consumer Prices Index (CPI) inflation rose to 3.2% in October, well above the target rate of 2%.

However, most MPC members continue to favour keeping rates on hold to aid the UK's economic recovery.

This comes ahead of VAT rising to 20% from 17.5% on 4 January, and the possible negative economic impact of the government's spending cuts.

Since June, MPC member Andrew Sentance has been voting in favour of raising interest rates from 0.5% to 0.75%.

Meanwhile, at the MPC's meetings in October and November, Adam Posen voted in favour of £50bn of extra QE.

QE involves the Bank putting fresh money into the financial system in an attempt to stimulate the economy.

'Minimise danger'

The British Chambers of Commerce said interest rates should remain on hold into 2011 to help the economic recovery, and that the Bank should consider restarting the QE programme.

David Kern, chief economist at the British Chambers of Commerce, said: "Despite positive economic news recently, risks of a setback will inevitably increase in the first half of 2011.

"While we support the painful fiscal measures needed to stabilise Britain's public finances, every effort must be made to minimise the danger of a downturn."

Recent official UK economic data showed that manufacturing output grew by 0.6% in October, the fastest pace since March.

Meanwhile, the overall UK economy grew by 0.8% between July and September.

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