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Bank of England holds interest rates at 0.5pc

The Bank of England today announced that interest rates will stay at their current record low of 0.5%.

The Telegraph reported "The Bank of England held interest rates at a record low of 0.5pc, despite increasing inflationary pressures, on concern that pushing rates up too soon could stifle the recovery.

Quantitative easing was also unchanged at £200bn.

None of the 62 economists polled by Reuters expected the Bank to raise rates today, and the Bank has not indicated it is considering an imminent change in the rate from 0.5pc, where it has been since March 2009.

However increases in food and oil prices are pushing up household bills, and the increase in VAT to 20pc is also expected to drive up inflation, which was running at 3pc in 2010. It could go to 4pc in the coming months.

That is above the Bank of England's goal of 2pc.

However government spending cuts will take hold in the coming months, which are expected to be a brake on growth, and the services sector is still weak."

In response to the news Nick Churton of Mayfair Office said "I think my hope, and that of the majority of those in the industry, is that the banks will start to become more flexible with their lending over this year in order to allow more buyers into the market place. There's demand there but borrowing is hard, even for those with generous deposits"