Interest rates unchanged

By staff

The Bank of England has kept interest rates at 0.5 per cent.

The decision was widely expected by economic analysts with governor Mervyn King making it clear last month that there was little scope for further cuts.

Since October, interest rates have fallen from five per cent to 0.5 per cent.

The Bank is believed to be carefully assessing the impact on the economy of its decision to introduce quantitative easing – basically the creation of more money – to stave off the threat of deflation.

It conducted the process by buying up a range of assets from financial markets in a move worth £75 billion over three months.

The process began last month and is less than a third complete, with £20 billion of UK government bonds purchased, and around £400 million of corporate bonds.

A further £75 billion could still be created through quantitative easing, after chancellor Alistair Darling gave the thumbs up for the monetary policy committee to spend a total of £150 billion. Further funds could be created if this is not deemed to be sufficient.