Bank holds rates at 0.5%; No change to QE

The Bank of England has held interest rates at 0.5% and kept its quantitative easing programme at £200bn – despite growing calls for a rate hike amid spiralling inflation.

Today's decision - almost two years to the day since the Bank first cut rates to their historic low in March 2009 - comes as the Bank's Monetary Policy Committee remains deeply divided on policy.

Last month, Spencer Dale joined fellow MPC members Andrew Sentance and Martin Weale in voting for a rate hike. With Sentance pushing for a bigger hike than his fellow hawks, the committee was divided in a four-way split.

The growing division comes as the committee struggles to balance mounting inflation concerns - with the CPI index hitting 4% in January - with a sluggish economy. Fears the recovery has lost steam were recently heightened with shock figures showing GDP contracted 0.6% during the final quarter of 2010.

In addition, disappointing figures from the manufacturing, construction and services industry all point to a slowing down of the economy.

Last week, Bank of England deputy governor Charlie Bean seemed to dampen expectations of an imminent rate hike when he warned the economy could be on the verge of a "durable slowing".

Speaking at a conference in London, he said the 0.6% GDP contraction in Q4 pointed to a possible slowing of the economy which could exert downward pressure on inflation.

But Bean conceded CPI inflation will increase beyond the current level of 4% - twice the MPC target - in the short term due to soaring commodity prices. He also warned of an oil price spike amid ongoing political turmoil in the Middle East and North Africa.

The last time the Bank raised the borrowing rate was as far back as July 2007 when it hiked the base rate by a quarter point to 5.75%.