Interest rates stay at 0.5%

Interest rates stay at 0.5%

The Bank of England has kept interest rates at record lows once more amid mounting gloom on the global economy and slowing UK growth.

The decision to keep rates at 0.5% follows predictions earlier this week from the National Institute of Economic and Social Research (NIESR) that UK economic growth slowed to 2.2% last year from 2.9% in 2014.

Interest rates have now remained unchanged for more than six years.

The world economy also remains in a fragile condition, reflected by tumbling global stock markets last week after a run of poor economic data and interruptions to trading in Chinese stocks.

Plunging oil prices - touching below 30 US dollars for the first time in 12 years - have added to the market woes and will keep a lid on already low UK inflation, meaning there is little pressure on the Bank to raise borrowing costs.

The US Federal Reserve hiked rates in America last month for the first time in nearly a decade, as the US economy expanded strongly last year.

But Bank of England governor Mark Carney has already said a decision to raise rates in the US is ''not decisive'' for UK policymakers, stressing that any such move on these shores will be made according to UK economic conditions.

Minutes of the latest rates meeting showed the Bank believes UK growth has been weaker than it predicted in November and that inflation is set to stay lower for longer.

It lowered its outlook for gross domestic product growth in the fourth quarter of last year and first quarter of this year by 0.1 percentage points to 0.5% in each quarter.

The Bank said: "Continued quarterly growth at rates of around 0.5% were likely around the turn of the year, a little weaker than the near-term outlook described in the committee's November Inflation Report."

Members of the Bank's nine-strong Monetary Policy Committee (MPC) voted eight to one to keep rates unchanged in its first decision of 2016.

The MPC said their decision was influenced by oil prices which have fallen by 40% since its November Inflation Report, which would likely mean global inflation would remain low in the near-term.

The Bank said it now expected UK inflation - currently at 0.1% - to rise more gradually that it stated in its November forecast, lifting to around 0.5% by the early months of 2016 and remaining around that level for several months.

It also cited recent volatile global markets as a reason to hold UK rates.

The MPC said: "Recent volatility in financial markets has underlined the downside risks to global growth, primarily emanating from emerging markets."