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Interest rates held at record low

The Bank of England's Monetary Policy Committee has held UK interest rates at their record low of 0.5%. The rate has prevailed for two years, despite inflation being currently twice the Bank's target rate, but there had been some speculation that rates could change this month after three MPC members voted for a rise in February.

The Bank of England's Monetary Policy Committee has held UK interest rates at their record low of 0.5%. The rate has prevailed for two years, despite inflation being currently twice the Bank's target rate, but there had been some speculation that rates could change this month after three MPC members voted for a rise in February.

The Bank has faced a dilemma over what to do on interest rates. Raising rates slows down inflation - and keeping inflation in check is the banks job.

"The short-term data continue to cloud the issue, but there are growing risks of inflation becoming more ingrained as firms attempt to bolster their profit margins and employees seek higher wage rises in the face of sharply increased costs of energy and commodities."

Interest rates remain at record low

Consumer price inflation currently stands at 4%, well above the Bank's target of 2%. As well as the VAT increase, the rate of inflation has also been pushed up by oil prices, which have risen amid concerns about political unrest in the Middle East and North Africa.

The British Chambers of Commerce (BCC) welcomed the decision to leave rates on hold, but said that continued speculation on interest rates could harm business.

"While the MPC cannot forecast its future actions, the way it currently communicates can create uncertainty. The MPC must address this in order to give businesses and market analysts a greater degree of predictability." said David Kern, chief economist at the BCC.

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