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Bank of England keeps interest rates at record low

posted 6 Mar 2014, 04:30 by Richard White   [ updated 26 May 2015, 04:48 ]

UK interest rates have been held at 0.5% for another month, the Bank of England has said.

The decision by the Bank's Monetary Policy Committee is made five years after the record low level was first introduced.

It is the first rate decision since the bank amended its "forward guidance" policy that made a link between borrowing rates to unemployment figures. It is thought by some analysts that rates are unlikely to rise before the spring of 2015.

The Bank also kept its £375bn quantitative easing (QE) programme unchanged.

The move equates to a half-decade of ultra-low interest rates and has seen returns on savings severely hampered, whilst on the other hand mortgage borrowers have reaped the benefits of lower repayments.

The committee's interest rate decision was the first to be based on "fuzzy guidance", which links borrowing rates to the speed at which the economy uses up spare capacity, as measured by 18 indicators.

Howard Archer, chief economist at IHS Global Insight, said: "The Bank of England clearly wants to nurture recovery and not to risk choking it off by raising interest rates too early or too fast." The Bank is likely to raise the interest rate to about 1% over the course of 2015, then to 2% by the end of 2016, Mr Archer said.