Bank Of England Leaves Interest Rates On Hold

The Bank of England has left interest rates on hold at 0.5% and indicated it would act "more cautiously" ahead of the EU referendum in June.

Officials on the Bank's nine-member Monetary Policy Committee (MPC (KOSDAQ: 050540.KQ - news) ) voted unanimously to leave rates unchanged, as well as its £375bn quantitative easing policy to inject stimulus into the economy.

Rates have been on hold since the height of the financial crisis in 2009 as policy makers tried to nurse the UK economy back to health. Speculation about the timing of a hike have grown as the economy recovers.

But minutes of the MPC's latest meeting indicated that the impact of the coming EU referendum meant it would have to be more careful about reacting to economic data in coming months.

The minutes said there were signs that uncertainty over the referendum was leading to company spending decisions and commercial property transactions being postponed pending the outcome of the vote, which could lead to weaker growth in the first half of 2016.

They added: "Referendum effects are likely to make macroeconomic and financial market indicators harder to interpret over the next few months, and the Committee is likely to react more cautiously to data news over this period than would normally be the case."

The minutes reinforced an earlier warning by Bank governor Mark Carney about the potential risks of a UK exit from the European Union, saying such a decision "might result in an extended period of uncertainty about the economic outlook".

Scott Bowman, UK economist at Capital Economics, said: "It (Other OTC: ITGL - news) appears that interest rates won't be increasing for a while yet. However, a rate cut does not appear to be on the cards either, despite market pricing implying this."

The decision comes days after official figures showed inflation had risen to a 15-month high of 0.5% in March though it remains well below the Bank's 2% target.

Economists have pushed back expectations for an interest rate hike into next year amid a darkening global economic picture.