Bank keeps interest rate at record low

The Bank of England ended the year as it began yesterday as it left its emergency support for the economy unchanged.

Policymakers held interest rates at 0.5 per cent for the 20th month in a row and maintained money-boosting efforts at 200bn under the Bank's quantitative easing (QE) programme.

Stronger-than-expected economic growth and an improved performance in the manufacturing sector in recent months has steadied the Bank's hands, despite expectations of a slowdown in the pace of recovery in the months ahead.

The Bank of England last altered its monetary policy in November 2009, when it increased the level of QE from 175bn to 200bn. Interest rates were lowered to their historic low of 0.5 per cent in March 2009.

The Monetary Policy Committee (MPC) was widely expected to leave policy unchanged following higher-than-expected third-quarter gross domestic product (GDP) growth of 0.8 per cent.

The good mood was bolstered by strong official manufacturing figures earlier this week, showing output rose 0.6 per cent month on month in October – the best reading since March and double expectations in the market.

But uncertainty returned yesterday as the UK's net trade – the difference between exports and imports – widened unexpectedly, knocking hopes of a private sector-led recovery.

Inflation has also been high, reaching 3.2 per cent last month, prompting calls from one MPC member for a quarter-point rate rise.