The Bank of England has announced that interest rates will remain on hold at the historic low of 0.5%.
The size of the Asset Purchase Programme will also remain the same at £200bn.
The Monetary Policy Committee (MPC) announced their decision at midday today. We were expecting this decision, with the recovery of the British economy still too fragile to risk a rate rise.
Currency markets were not expecting to see an interest rate rise today, although there are some signals that a small rise of 0.25% has been priced in for around June or July.
Some policymakers and MPC members appear to be growing increasingly nervous about stubbornly high levels of price inflation. There are strong arguments to suggest that an interest rate hike would do little to bring these under control, with much of the current inflation we are experiencing due to temporary or imported factors.
The rate decision comes on the same day that UK manufacturers have reported strong growth.
During January, British manufacturing output grew at its fastest pace for sixteen years. It was up 6.8% compared to January 2010.
The decision today to keep interest rates on hold is bound to disappoint savers who continue to struggle with low rates and are seeing the purchasing power of their savings eroded by inflation.
The Bank Rate was reduced to 0.5% in March 2009 and has stayed at this historic low for two years.
We look forward to reading the minutes from the MPC meeting when they are published on 23rd March 2011, the same day as the Budget.
