Interest rate held despite oil rise fears

The Bank of England has refused to bow to pressure over surging inflation and has held interest rates at their historic low of 0.5 per cent.

The debate among the nine-strong Monetary Policy Committee is likely to have been heated as new pressures on inflation emerged and recent voting evidence showed an increase in the number of policymakers backing a hike.

The borrowing rate was last changed in March 2009, but the Consumer Prices Index measure of inflation rose to 4 per cent in January - well above the Bank's 2 per cent medium-term target - while governor Mervyn King has warned it could hit 5 per cent.

Furthermore, recent unrest in North Africa and the Middle East has driven up oil prices, which is expected to add further pressure to the cost of living.

Ian McCafferty, chief economic adviser at the CBI, said the no-change decision was unsurprising but an increase in rates is becoming more likely.

"The short-term data continue to cloud the issue, but there are growing risks of inflation becoming more ingrained as firms attempt to bolster their profit margins and employees seek higher wage rises in the face of sharply increased costs," he said.