The Bank of England has maintained the base rate at 0.5% after a unanimous Monetary Police Committee decision to hold rates.

The bank's Monetary Policy Committe members voted without exception to maintain the rate - which increased late last year from 0.25% - and also maintain the bank's purchase of corporate bonds and UK government bonds at £435bn. 

With signs of inflationary pressures easing slightly recently, experts believe it may be some while before a further increase in rates although with pressure to increase interest rates in the US likely this year, some commentators forecast a gentle rise in the UK base rate towards the 'more normal' 2% level over time.

However, with economic uncertainty and Brexit on the horizon, the MPC hinted it may possibly raise rates at a faster pace if necessary. The MPC said: "Developments regarding the United Kingdom’s withdrawal from the European Union – and in particular the reaction of households, businesses and asset prices to them – remain the most significant influence on, and source of uncertainty about, the economic outlook. In such exceptional circumstances, the MPC’s remit specifies that the Committee must balance any trade-off between the speed at which it intends to return inflation sustainably to the target and the support that monetary policy provides to jobs and activity."

Looking further ahead, the MPC said: "Since November, the prospect of a greater degree of excess demand over the forecast period and the expectation that inflation would remain above the target have further diminished the trade-off that the MPC is required to balance. It is therefore appropriate to set monetary policy so that inflation returns sustainably to its target at a more conventional horizon.

"The Committee judges that, were the economy to evolve broadly in line with the February Inflation Report projections, monetary policy would need to be tightened somewhat earlier and by a somewhat greater extent over the forecast period than anticipated at the time of the November Report, in order to return inflation sustainably to the target.

"In light of these considerations, all members thought that the current policy stance remained appropriate to balance the demands of the MPC’s remit. Any future increases in Bank Rate are expected to be at a gradual pace and to a limited extent. The Committee will monitor closely the incoming evidence on the evolving economic outlook, and stands ready to respond to developments as they unfold to ensure a sustainable return of inflation to the 2% target."

The MPC noted that the global economy is growing "at its fastest pace in seven years" and says the expansion is increasingly broad-based and investment driven.

It says as a result that UK net trade is benefiting from robust global demand and the past depreciation of sterling. Along with high rates of profitability, the low cost of capital and limited spare capacity, strong global activity is supporting business investment, although it remains restrained by Brexit-related uncertainties.

Household consumption growth is expected to remain relatively subdued, says the MPC, reflecting weak real income growth. GDP growth is expected to average around 1.75% over the forecast, a slightly faster pace than was projected in November.

While modest by historical standards, the rate of UK GDP growth is still expected to exceed the diminished rate of supply growth and the MPC judges that the UK economy has only a "very limited degree of slack" and that its supply capacity will grow only modestly over the forecast, averaging around 1.5% per year. This reflects lower growth in labour supply and rates of productivity growth that are around half of their pre-crisis average. As growth in demand outpaces that of supply, a small margin of excess demand emerges by early 2020 and builds thereafter.

Inflation is expected to remain around 3% in the short term, reflecting recent higher oil prices. A range of survey indicators suggest pay growth will rise further in response to the tightening labour market. On balance, CPI inflation is projected to fall back gradually over the forecast but remain above the 2% target in the second and third years of the MPC’s central projection, says the MPC.