Bank unanimous in holding rates

The Bank said significant risks to the economy remained

The Bank of England's interest rate setters voted unanimously to hold interest rates at the record low of 0.5% earlier this month.

Minutes from the meeting also showed the Monetary Policy Committee (MPC) agreed to maintain the £125bn quantitative easing programme.

The MPC also noted there had been encouraging news on the economy.

"Overall, the risk of a continued sharp contraction on output in the near term had receded somewhat," the MPC said.

However, the committee added that there was not enough evidence to suggest that the medium-term outlook for the economy had changed significantly since the Bank's last Inflation Report in May.

Risks remain

The minutes of the MPC meeting on 3 and 4 June noted that the economic news from the previous month had been "mostly encouraging".

Surveys suggested the rate of contraction in the economy was slowing, business confidence was improving and the housing market was stabilising.

However, the committee said that increases in confidence among consumers and business "remained fragile" and it noted that "significant risks remained domestically and overseas".

Now that interest rates are at record lows, the Bank of England is now using a method known as quantitative easing to pump money into the financial system in an attempt to revive the economy.

Under quantitative easing, the Bank is buying government and corporate bonds from financial institutions using money it has created electronically - so-called "printing money".

The institutions selling these assets will then have "new" money in their accounts, which then boosts the money supply.

At the time of the meeting, the Bank's programme of quantitative easing had acquired £80bn of assets, and the minutes said it would take a further two months before the £125bn target was met.

"It remained too early to assess the impact of the asset purchase programme on nominal demand," the minutes said.

But it noted there was "tentative evidence that the asset purchase programme was succeeding in boosting the money holdings of institutional investors, a first stage in the transmission mechanism from asset purchases through to the economy".