UK interest rates remain on hold

The Bank of England's rate-setting committee has kept UK interest rates on hold at 0.5% for the seventh successive month, as widely expected.

The Bank also said it would continue with its programme of pumping £175bn into the economy, which it said would likely take another month to complete.

Interest rates remain on hold as data continues to show that any UK economic recovery remains patchy.

Figures out later this month could show that the UK has exited recession.

'No risks'

The Bank added that it would keep the scale of its programme of expanding the amount of money in the economy, a policy known as quantitative easing (QE), "under review".

Where there is uncertainty is about what happens next month, when the committee has a new set of inflation report forecasts and the Bank of England will have met the current QE target Philip Shaw, UK economist at Investec Low rates lead to mortgage shift

Back in August it announced that the funds in the scheme would be raised to the current £175bn level from £125bn.

Analysts were in agreement that the key issue was now whether QE does end next next month, or whether the Bank's Monetary Policy Committee announces after its October meeting that it will be extended.

"It is as yet early days in gauging the effect of the QE programme so far, but companies are still facing serious constraints in their financing, so the Bank must take no risks in ending the programme prematurely," said CBI chief economic adviser Ian McCafferty.

Philip Shaw, UK economist at Investec, said the Bank's latest rates decision was "highly predictable".

"Where there is uncertainty is about what happens next month, when the committee has a new set of inflation report forecasts and the Bank of England will have met the current QE target."

Weak industrial output

Many commentators have said that the economy probably expanded during the July-to-September period, citing rising house prices and a big rise in car sales - despite the later being helped by the government's scrappage scheme.

However, official figures showed earlier this month that UK industrial output fell unexpectedly in August, declining 2.5% from July.

This prompted the National Institute of Economic and Social Research think tank to predict that the UK economy failed to grow in the third quarter.

The official figures will be released by the Office for National Statistics on 23 October.

The economy contracted 0.6% between April and June, following a 2.4% decline from January to March.