Interest rate remains at record low

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The Bank of England yesterday held off from pumping more emergency cash into the economy amid fears that inflation is not falling back as quickly as expected.

The most recent £50bn injection into the Bank’s quantitative easing (QE) programme took place in February but members of the monetary policy committee (MPC) have vetoed increasing the stock of asset purchases from £325bn.

Interest rates were held at their record low of 0.5 per cent but economists said the verdict of the nine-strong committee on QE would have been a close call. They think that a further round of QE could still take place by August.

Despite the UK’s return to recession in the first quarter and renewed tensions in the eurozone, members were probably influenced by inflation remaining stubbornly high at 3.5 per cent in March, against expectations that it will meet the Government’s 2 per cent target by the end of this year.

A CBI economist said: “The combination of sluggish activity and sticky inflation put the MPC in a difficult position, and this decision is likely to have been a close call.”