BREAKING NEWS: Interest rates held ahead of Budget

INTEREST rates were held at their historic low today as Bank of England monetary chiefs looked to inject stability into the economy ahead of this month’s emergency Budget.

The Monetary Policy Committee as expected voted to keep the cost of borrowing at 0.5% to try and calm recent turmoil following the announcement of savage cutbacks by the new coalition Government and continuing concerns over the health of the Eurozone.

The decision, which also extends the freeze on quantitative easing, is in line with the Bank’s long-term policy of not risking any damage to the fragile recovery.

The Committee is thought to be unwilling to place any undue pressure on the fragile economy, which is still growing – but only just.

It is also adopting a ‘wait-and-see’ attitude to what might happen once the new Chancellor delivers his first Budget on June 22.

Birmingham Chamber of Commerce and Industry welocomed the decision and repeated its call to the MPC to keep rates low while the economic recovery is underway.

Katie Teasdale, head of policy, said: “The situation remains fragile and the risks of a relapse cannot be ignored.

“We are asking rates to be kept low for a prolonged period to enable firms to invest. In our view, raising rates to tackle the spectre of inflation would stymie growth at a key point in the economic cycle.”

Mark Smith, Midlands regional chairman at PwC, said: “With the new government’s budget due in less than two weeks, today’s decision to keep both interest rates and quantitative easing on hold was expected.

“The committee has an important balance to strike between protecting the recovery and risking the return of inflation so it will inevitably want to consider the scale and impact of likely tax hikes and spending cuts announced on June 22 before making its next move. However a significant tightening of monetary policy still seems some way off, despite some concern over rising inflation.”