Interest rates held ahead of emergency Budget

BANK of England monetary chiefs have voted to hold interest rates at an historic low, in a bid to stabilise confidence in the economy ahead of the emergency Budget.

The Monetary Policy Committee, as expected, voted to keep the cost of borrowing at 0.5% and to maintain its quantitative easing programme of bond holdings at £200bn.

Bank of England governor Mervyn King will be hoping the decision will shield the economy from the eurozone debt crisis, and help alleviate uncertainty caused by the upcoming emergency Budget on June 22.

There are fears that the size of planned Budget cuts could derail the recovery and send the economy back into recession.

Dr Brian Sloan, head of business and economic policy at Greater Manchester Chamber, said: “The governor of the Bank of England has recently expressed support for the coalition’s plans to address the deficit so we should see today’s decision as a further vote of confidence.

“This confidence will allow the bank to maintain its expansionary stance with low interest rates for longer, which will be good news for businesses and consumers, in turn helping to sustain the recovery.

“We hope the bank’s confidence is shared by the ratings agencies as the economy sits on a knife edge between inflation and deflation.

“The economy doesn’t need a third party upsetting the delicate balance being maintained between the Government and the Bank of England at this moment in time.”