Bank and eurozone freeze interest rates at record low

The Bank of England's monetary policy committee voted to keep interest rates and the quantitative easing money-printing programme on hold today.

Its decision means base rates have now remained at their record low of 0.5% for a year, while also meaning the Bank will not, for now at any rate, be extending QE beyond £200 billion.

The European Central Bank followed suit later this afternoon, keeping rates on hold at 1%.

The Bank of England is faced with competing pressures of rising inflation, which at present is running at 3.5%, and continuing wobbles in the economy.

Governor Mervyn King has repeatedly said the inflation rise of recent months is a temporary spike that should not result in a knee-jerk reaction to raise interest rates.

Howard Archer, chief economist at IHS Global Insight, applauded the no-change decision: "The economy seems destined to go through many more twists and turns over the coming months.

"Furthermore, when interest rates finally do start to rise, the increases are likely to be gradual and limited because of the need to offset the marked tightening in fiscal policy that will kick in in 2011 at the latest."

Lee Hopley, chief economist at the Engineering Employers' Federation, said: "The MPC continues to face a mixed economic picture with growth at the end of 2009 helped by stimulus measures that have now all but gone. An unchanged position at this point is the right one given the ongoing uncertainty about the strength of the recovery."

While the Bank of England gave no statement outlining its reasoning, European Central Bank governor Jean Claude Trichet said: "We had overwhelming consensus. The economic recovery in the euro area is on track, although it is likely to remain uneven."

Asked about the Greek crisis, Trichet said the decisions taken by the Athens government were "convincing" and repeated that it was "absurd" to talk of Greece leaving the eurozone.

The mixed picture of the British economy was highlighted today as figures from the Halifax showed falling house prices in February while, on the other hand, the Society of Motor Manufacturers and Traders said new car sales were up 26.4% on the same month a year ago.

Halifax said the average cost of a home fell by 1.5% during the month to £166,857, in figures which echoed the 1% slide reported in the Nationwide's survey of the same month. The slide was partly blamed on a fall in activity caused by the wintry weather and the stamp duty threshold falling back to £125,000 at the end of December. But some economists said such bumpy price moves would be seen all this year.

SMMT figures showed although about a fifth of the cars bought were under the temporary car scrappage scheme, the evidence was there that consumers remain confident enough to spend.