Bank of England keeps rates at record low

The Bank of England kept interest rates at a record 0.5% today but stopped short of taking emergency action to kick-start the faltering UK economy.

Fears the UK is facing a double-dip recession have fuelled expectations that the Bank’s Monetary Policy Committee (MPC) will extend its £200bn (€228bn) quantitative easing (QE) programme – effectively printing more cash.

Business leaders and economists say there are strong arguments in favour of upping the QE stock, but accept action is unlikely until later in the year.

Such a move would be a high-risk strategy because it could fuel inflation, which is well above target at 4.4%, and put more pressure on household budgets.

Soft manufacturing growth, a contraction in the powerhouse services sector and increased global uncertainty – reflected in recent stock market turmoil – have prompted a raft of forecasters to slash economic predictions.

The OECD warned today it fears the world economy is close to grinding to a halt as increased uncertainty hampers growth. Its central forecast for the UK in the final quarter of 2011 is for annualised GDP growth of just 0.3%, compared with 2.5% growth last autumn.

And Chancellor George Osborne this week signalled that GDP forecasts were set to be downgraded in his autumn statement on November 29.

However, he insisted that the Government would stick to its deficit reduction plan, which he described as “the rock of stability upon which any sustainable recovery depends”.