Bank holds interest rate at 0.5% for 3 years

The Bank of England's Monetary Policy Committee (MPC) has voted to keep interest rates at 0.5 per cent for another month, marking three years since the rate first plummeted to its record low.

The base rate, the measure in which UK banks set their interest rates, has languished at its historic 0.5 per cent low since 5 March 2009. The Committee has also agreed to continue with its quantitative easing (QE) programme which now totals £325 billion after a further £50 billion was injected into the economy last month.

The combination of low rates and high levels of QE has been particularly painful for savers and those approaching retirement as record low interest rates have wiped £76 billion off savings in the past three years, according to The Daily Mail.

Economic consultants Capital Economics have speculated that interest rates could remain at this level for a further three years. Capital Economics' chief economist, Vicky Redwood, said that weak bank lending and a slower than expected economic recovery could lead to rates remaining low and another round of QE beginning later this year.

Responding to Bank's announcement, The Confederation of British Industry's (CBI's) chief economic adviser Ian McCafferty, said: "Since the MPC has been signalling that the current policy stance is broadly appropriate, it appears that the economic climate would have to deteriorate to prompt a further extension of QE.

"Nevertheless, with economic conditions fragile and the level of uncertainty high, monetary policy decisions are still likely to be finely-balanced."

The scale of the Bank's QE programme will be kept under review as the committee expects its current round of asset purchases to take another two months to complete.