The MPC also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at £200 billion.
Paul Hunt, managing director of Phoebus Software, said: “The MPC does not need to tinker with the Bank Rate because the current level is entirely fit for purpose. There’s no need to lower rates further now as the fears of a double dip have receded so far but neither should we raise them in a knee-jerk reaction to stamp on inflation.”
Barry Naisbitt, chief economist at Santander UK, said the minutes for today’s meeting would be revealing.
“With inflation still well above its target, and expected to rise even further in the coming months after the VAT increase, it will be interesting to see if the members have changed their concerns about the economic risks,” he said.
Inflation measured by the consumer prices index was at or above 3% throughout 2010, consistently above the Bank’s inflation target of 2%.
In its most recent forecast in November 2010, the Bank said it expects inflation to say above 3% for the rest of 2011 before falling back to 2% at the start of 2012 when the recent VAT rise from 17.5% to 20% falls out of the calculation.
Christina Weisz, a director of foreign exchange specialists, Currency Solutions, said: "Despite the continuing problems with inflation figures any potential interest rate rise to counteract the inflationary problem that the Bank of England faces is complicated by the ongoing introduction of budget cuts, austerity measures, the VAT rise and threat of rising unemployment. All of these have prevented a clearer picture of economic growth to come to the fore.”
Ian McCafferty, CBI Chief Economic Adviser, said: “The Bank is grappling with the need to balance the two conflicting issues of inflation and growth. While this hold announcement is not a surprise, decisions in the coming months will be more difficult as the Bank’s anti-inflation credibility comes under greater pressure.
“If current economic trends continue, we expect the MPC to respond both in the tone of its commentary and by nudging interest rates higher before mid-year.”
And Simon Gammon, head of Knight Frank Finance, said: “This morning’s decision to keep the base rate on hold at 0.5% for the 22nd month running was very much as expected, but the pressure for an increase is starting to mount.
"Uncertainty about what will happen to interest rates is driving people to consider their options, especially with regards to their mortgages. With fixed rates now starting to edge up, now is a good time to review your borrowing.”
