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Interest rates remain at record low

09 July 2009 / by Rebecca Sargent

The Bank of England's Monetary Policy Committee (MPC) has voted to keep the base rate at its record low of 0.5 per cent for another month.

The MPC first cut the base rate to 0.5 per cent in March, and it has remained there ever since, as the Bank of England seeks ulterior economy boosting plans.

The quantitative easing program, which has so far allowed the Bank to pump £125billion into the UK's economy remained unchanged this month, despite predictions that it would be extended to the maximum agreed limit of £150billion.

Commenting, David Kuo, director at Fool.co.uk said: "It is no surprise that the Bank of England has kept interest rates on hold. The UK economy continues to stutter under the weight of consumer debt accumulated over the years.

"We expect the bank to continue printing money to prevent the economy from stalling. But we need to be acutely aware of inflation. It is as damaging to our wealth as the credit crunch."

It seems that inflation concerns could force the MPC to prematurely increase the base rate, Ben Thompson, director of mortgages at Legal & General adds: "Inflation figures came in higher than expected which may mean that the MPC needs to raise rates before the end of next year.

"Throughout 2010 the challenge for the MPC will shift towards combating inflation whilst not going so far as to choke off any economic recovery," he added.

The next current rate of inflation is due to be announced next week.

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