UK interest rates kept at record low

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 comes 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 linked borrowing rates to unemployment figures.

Rates are unlikely to rise before the spring of 2015, analysts believe.

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

The half-decade of ultra-low interest rates has seen returns on savings hammered, while mortgage borrowers have reaped the benefits of lower repayments.

The committee's interest rate decision was the first to be influenced by what has been dubbed "fuzzy guidance", in which the Bank 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.

However, the British Chambers of Commerce (BCC) said the Bank should resist any pressure to act sooner.

"The continued clamour for early rate rises is unwelcome and undermines the benefits of forward guidance to business, consumers and the markets," said David Kern, the BCC's chief economist.

"Even though we are getting closer to pre-recession GDP levels, this does not mean that the economy is back to normal."