Bank of England keeps interest rates at record low

LONDON (AP) – The Bank of England on Thursday left its base interest rate at a record low of 0.5 percent for the 16th consecutive month as the economic recovery remaines fragile and public spending cuts are expected to hamper future growth.

Find Trades Today The decision by the Bank’s Monetary Policy Committee had been widely expected by analysts despite a rise in consumer price inflation to 3.7 percent in April – well above the official target of 2 percent.

Britain’s economy is recovering slowly from a long recession, and Prime Minister David Cameron’s new coalition government has yet to disclose its plans for reducing deficit spending – which are crucial to shore up confidence in its credit worthiness but risks hurting growth in coming years.

"The MPC was always unlikely to act before seeing what grisly measures the emergency budget on 22 June has in store for the U.K. economy," said Howard Archer, economist at IHS Global Insight.

Hetal Mehta, senior economic adviser to the Ernst & Young ITEM Club, said he believes inflation was at or close to its peak.

"Our forecast shows inflation drifting downwards over the remainder of this year as the high margin of spare capacity exerts an increasing influence, then dropping below 2 percent at the start of next year," he said.