Rates at record low for 12 months

THE Bank of England has kept the cost of borrowing at 0.5%, marking a year of the lowest rates in its 316-year history.

Its monetary policy committee (MPC) has voted to freeze rates for another month and hold back on quantitative easing, its money-printing scheme.

The value of the programme stands at £200bn which is being used to stimulate the economy through bond purchases from financial institutions.

It was last increased in November when the Bank added a further £25bn and said the extra cash would take three months to work through the system.

Many economists do not expect the MPC to increase rates for some time. They believe any increase could jeopardise the economic recovery.

Figures out last week showed that the economy grew by 0.3% in the final quarter of 2009, compared with an initial estimate of 0.1% growth.

The economy pulled out of recession in January and some economists believe QE will aid recovery. But it has its detractors who fear it is stoking future inflation.

Brian Sloan, head of business and economic policy at Greater Manchester Chamber of Commerce, said: “We welcome the Bank of England’s decision to keep interest rates at 0.5%. The MPC recognises that the recovery requires its support, however the Government needs to play its part and do more to encourage banks to lend to small and medium sized businesses.

“There is evidence that the money that the Bank has pumped into the economy through quantitative easing is not leading to increased lending to these businesses, which could have a significant impact on levels of investment and job creation amongst these businesses in the months ahead.”