INTEREST rates were held at their record low of 0.5% after the Bank of England’s monetary policy meeting yesterday. The Monetary Policy Committee (MPC) also decided that it would not expand its policy of quantitative easing as it continues to try to ease the UK’s economic recovery and meet inflationary targets.

Interest rates on borrowing have now been maintained at 0.5% for more than a year and financial experts do not expect the policy to change this year. The country emerged from recession in the final quarter of 2009 after six consecutive quarters of economic contraction.

Latest figures from the ONS showed that the economy grew by 0.4% in the last three months of 2009, and recent surveys have indicated that the economy has continued to grow. Economic experts yesterday said the rate maintenance was expected.

Economic adviser to Deloitte Roger Bootle said: “Having left interest rates and its programme of asset purchases unchanged again this month, the Committee clearly remains in wait-and-see mode.

“What’s more, its concerns about loosening policy further while inflation is so far above target are likely to keep the MPC on hold for a while longer, particularly given the added uncertainty due to the General Election.

“But the case for a further policy stimulus could before long look compelling. The recovery is built on feeble foundations and will soon start to struggle.

“The MPC is still waiting to see how the effects of its past asset purchases pan out. But based on the evidence so far, I think that the committee will only be disappointed. Anyone expecting interest rates to rise before the end of the year is barking up the wrong tree.

“Inflationary pressures already look to be fading, with retailers absorbing much of the rise in VAT at the start of the year. Some members of the MPC have started to fret about the inflationary impact of the lower pound. But even if the pound stays at its current level, import price inflation is likely to get to only a fraction of the rates seen in 2008 to 2009.”

Simon Evans, spokesman for Federation of Small Businesses in Wales, said the experts have made the decision on the available facts. He said: “We need a level of confidence in the economy that will drive us further out of this recession. For that to happen, we need stability and confidence – these things are key to help people set a budget for the coming year and tell them what they will have in their pockets.

“We are going through a fragile recovery and are coming out of recession, so we need the stability that allows people to keep making their mortgage payments and associated cost.”

Robert Lloyd Griffiths, director of the Institute of Directors Wales, said: “Against the backdrop of an impending general election and a still weak economy, this is the decision we expected. With the business environment remaining difficult there is a compelling case for keeping monetary policy loose for the foreseeable future.”

Lai Wah Co, CBI head of economic analysis, said: “Growth in the economy looks to have held up over the first quarter, albeit at a slow rate, but there are still uncertainties about the strength and sustainability of the recovery this year.

“At last month’s MPC meeting, some members were more concerned about the upward risk to inflation from higher energy prices and weak sterling, so it will be interesting to see how the Bank re-evaluates its inflation outlook when it publishes new forecasts next month.”