Breaking News: Base rate held at 0.5%

THE Bank of England has kept the cost of borrowing steady at 0.5% and increased the size of its asset purchase scheme by £50bn.

The hold was widely expected and means rates have stayed at a historic low since March 5.

Today the Bank said it would pump more money into the economy by ramping up the cash available to buy assets such as government securities and corporate bonds.

So far it has injected around £50bn from a pot of £75bn. It now plans to extend this to £125bn and has permission from the Chancellor Alistair Darling to go up to £150bn.

In a statement the Bank said: “The world remains in deep recession… In the UK gross domestic product fell sharply in the first quarter of 2009. But surveys at home and abroad show promising signs that the pace of decline has begun to moderate.”

The asset purchase scheme, funded through quantitative easing – or printing new money – has been well-received by the City and there are signs business confidence is returning.

But house prices are still slipping – down to 2004 levels according to the latest figures – and unemployment continues to rise.

Since the start of the banking crisis in September six cuts have brought the base rate down from 5%. Many economists now expect the Bank to hold at 0.5% until next year.

Today the Bank said the base rate hold would keep inflation on track to meet the 2% target.