Interest rates held at 0.5%

The Bank of England’s Monetary Policy Committee has voted to hold interest rates at 0.5% for the 17th consecutive month.

The MPC also voted to maintain quantitative easing at £200bn.

MPC member Andrew Sentance has voted for a rise in interest rates for the last two months but the other members have all voted to maintain rates.

The Bank’s inflation target of 2% is still being exceeded and inflation currently stands at 3.2%.

Jonathan Samuels, chief executive officer at Drawbridge Finance, says: “We do not expect anything but a hold for the rest of 2010. Although it improved in Q2, there are still mixed messages coming out of the economy and until the ground becomes firmer the MPC is unlikely to raise Bank Rate.

“It’s crucial that when rates do rise they go up at a pace that will not give the economy the bends.”

Alison Beech, business relationship director at Spicerhaart and Valuation, adds that it is not surprising and although a 0.25% rise may help curb inflation other economic factors take precedence.

She adds: “While they have not been brave enough to make the increase this month, I would fully expect at least one rise before the year end. Why not do this now rather than wait and create some distance between an interest rate increase and the VAT rise to 20% scheduled for January 2011?”