Bank of England holds firm on rates

INTEREST rates were pegged at the record low of 0.5% again today as the Bank of England resisted the temptation to pump more money into the flagging economy after last month’s £75bn injection.

The Bank raised its Quantitative Easing programme to £275bn in October amid fears over the strength of the economic recovery, which continue to grow amid the deepening Eurozone debt crisis.

Although inflation remains more than double the Bank’s target of 2%  policymakers are much more concerned by the threat of a second recession.

The Bank says inflation it is at a temporary peak and will fall in 2012.

The bleak picture in Europe – the UK’s biggest trading partner – was confirmed this morning when the European Union slashed ts growth forecast for the eurozone in 2012, from 1.8% down to just 0.5%.

European Commissioner Olli Rehn said: “Growth has stalled in Europe and there is a risk of a new recession.

David Ost, North West director at EEF, the manufacturers’ organisation said he was not suprised by the decision after the increase in QE last month.

“However, ahead of the November Inflation report the Committee is likely to be looking at a much weaker set of growth forecasts, where the potential risks to the economy have increased significantly. With growing turbulence in Europe, the possibility of further action can’t be taken off the table.”