Bank of England’s Monetary Policy Committee (MPC) yesterday froze the interest rate at 0.5 per cent while persevering with quantitative easing until next month.
The interest rate has remained unchanged since March after the MPC took drastic action to tackle the global economic crisis.
Quantitative easing, aimed at pumping cash into the financial system, will be maintained at £200bn until the economy is deemed to be back on its feet.
UK economist at BNP Paribas Alan Clarke said: “Everything pointed to this decision. The labour market is doing better than expected and GDP and inflation are also okay.
“The decision is not a surprise. However, I am worried that the government’s bond gilts are rising quite sharply.
“I have argued in favour of quantitative easing and think there should be more of it. There is a debate over whether to stop it soon but I think ceasing it too early could threaten our tentative recovery.”
Howard Archer of Global Insight said: “The latest economic data and surveys have been more upbeat overall and tentative signs are emerging that money supply growth and bank lending could be picking up.”
Britain is believed to have returned to economic growth in the final few months of 2009.
Philip Shaw, chief economist at Investec said: “The environment for the MPC now becomes much more challenging. It has to decide whether to provide more quantitative easing next month. It is possible, but we doubt that it will.”