Interest rates kept at record 0.5pc low

THE Bank of England stuck to its policy of ultra-loose interest rates yesterday when it held the cost of borrowing at 0.5 per cent and kept the stock of asset purchases at £200bn.

The 0.5 per cent rate has now been in place for 14 months – the longest streak of unchanged rates since the early 1950s.

The move was widely expected by the City although some hawkish analysts had called for a hike to maintain the Bank’s inflation-targeting credibility.

However, an aggressive emergency Budget on 22 June may persuade the MPC to hold its fire into 2011, said Philip Shaw, UK economist for Investec. Eurozone trouble may also stay the MPC’s hand, said Commerzbank’s Peter Dixon.