Interest rates stay at record low as optimism grows over UK recovery

Borrowing costs have been held at 0.5 per cent for more than a year as the Bank's Monetary Policy Committee (MPC) attempts to soothe the ailing economy.

The committee also opted not to alter the 200bn it has spent so far on quantitative easing to boost the money supply.

Its decision comes in the wake of recent figures showing the UK moved out of recession faster than originally thought in the fourth quarter of 2009.

Recovery hopes were also raised this week by predictions from the Organisation for Economic Co-operation and Development that UK output will grow at a faster pace than many other major international nations at the beginning of this year.

Strong manufacturing and services data have also added to the positive mood.

The MPC will also have considered the fall in February's rate of inflation to 3 per cent, from 3.5 per cent in January.

This has eased fears about pressure on the Bank for rate increases as it looks to steer inflation to its 2 per cent target.

The Bank's decision was in line with economists' expectations.

David Kern, chief economist at the British Chambers of Commerce, said it "would be wrong" to think about changing policy at the moment.

"A fragile recovery is now under way, but the upturn must be nurtured to counter risks of a relapse," he said. "Despite the upward revision to GDP in the fourth quarter of 2009, and the prospect of positive growth in the first quarter of this year, the economy remains weak and vulnerable to a setback."