The Bank of England’s Monetary Policy Committee have kept UK interest rates at the record low of 0.5%.
Figures released this week suggested a slowdown in growth to manufacturing, construction and services, pointing to a weak recovery, which was taken by economists as a sign that the rate would remain the same.
This comes despite the high inflation rate currently at 4% – double the Bank’s target rate.
The Monetary Policy Committee did not talk of any new quantitative easing plans.
The European Central Bank also left rates unchanged for the eurozone, after raising them to 1.25% in April.The Bank has been faced with a difficult dilemma – keep interest rates low in an attempt to encourage the economic recovery, or push them up to cut inflation.
If rates were increased it would take demand out of the economy which in turn would slow down inflation.
However, it would also increase the cost of borrowing, which could trigger fresh concerns of pushing the UK back into recession.
This isn’t the news that savers were hoping for, as rates on savings accounts remain low across the board.