The Bank of England on Thursday kept interest rates at a record low 0.50 percent, where they have now stood for two years, as it opted against lifting borrowing costs to fight high inflation.

The British central bank announced in a statement that its nine-member monetary policy committee (MPC) voted to hold its key lending rate at 0.50 percent at a regular monthly meeting in central London.

"The announcement comes despite ongoing concerns about inflation in the UK," said economist Scott Corfe at the Centre for Economics and Business Research consultancy, adding that he expected a rate hike in April or May.

"Despite concerns about economic growth, the MPC is likely to feel compelled to raise rates, to prevent inflation expectations rising and feeding through into higher employee wage demands in the medium-term."

Policymakers also decided not to change the BoE's stimulus programme, known as quantitative easing, under which it injected 200 billion pounds (235 billion euros, $322 billion) into the economy in a plan that ended in January 2010.

Both decisions were in line with expectations. Official minutes from the Monetary Policy Committee (MPC) meeting will be published on March 23, when the reasons behind the decisions will be disclosed.

The BoE's decision came after the European Central Bank signalled that it would likely hike eurozone borrowing costs next month to fight soaring inflation.

Annual British inflation hit a two-year high of 4.0 percent in January, double the BoE's target level, on the back of surging oil prices and food bills.

Since January, world oil prices have rocketed to their highest levels since late 2008, propelled by worsening violence in Libya and spreading unrest across the oil-rich Middle East and North Africa region.

The Bank of England's nine-member MPC has been torn this year between raising rates to combat above-target consumer price inflation - or leaving them at a record-low level to aid recovery.

Two MPC members had voted for a rate hike in January and they were joined by another hawk in February amid mounting inflation concerns.

Ahead of this week's BoE decision, official data has hinted that the UK economy could be on the road to recovery in the first quarter of 2011.

"Despite heightened pressure on the Bank of England, with inflation now at 4.0 percent, a rise in interest rates today would have been a surprise," said economist Nida Ali at accountancy firm Ernst & Young.

"Nothing that has happened over the past month would justify any member moving into the hikers' camp.

"If anything, those who have been wavering would have been dissuaded from moving given the heightened uncertainty surrounding the troubles in North Africa and the Middle East and its impact on oil."

At the same time, serious concerns remain over the plight of the British economy, which shrank by a worse-than-expected 0.6 percent in the final quarter of 2010.

The British coalition government's deficit-slashing austerity measures could also hamper economic recovery this year but the BoE will have drawn some comfort from a batch of upbeat economic data this week.

Manufacturing output expanded in January at the fastest annual rate for 16 years, jumping 6.8 percent compared with the same month one year earlier.

And the nation's trade-in-goods deficit narrowed by more than expected in January as exports hit a record high.

channelnewsasia.com