Interest rates held again

BANK of England policymakers erred on the side of caution again today and opted to make no change on interest rates, holding the level at 0.5%.

The better-than-expected 0.3% growth in the economy during the first three months of the year – ensuring the UK avoided an unprecedented triple-dip recession – is thought to have persuaded the Monetary Policy Committee to avoid any change of course.

While the manufacturing and construction sectors remain subdued, it is thought the policymakers may be influenced by more encouraging surveys suggesting output will grow during Q2.

The impact of the Funding for Lending Scheme, which gives the banks more incentive to lend to SMEs, could also have been a factor in determining strategy, persuading the MPC from re-examining an extension of quantitative easing or buying up government bonds.

Most analysts now believe any change of approach by the Bank is unlikely until Mark Carney succeeds current governor Sir Mervyn King in July.