The Bank of England has held its base rate at 0.25%, it announced at midday.

The rate stays the same after it was cut in August from 0.5%, which was the first change made in seven years.

The decision comes as in the USA, The US Federal Reserve raised interest rates for the first time in a year yesterday. It was only the second time since the 2008 financial crisis.

The Bank's Monetary Policy Committee voted unanimously to:

• continue with the programme of sterling non-financial investment-grade corporate bond purchases totalling up to £10 billion, financed by the issuance of central bank reserves
• continue with the programme of £60 billion of UK government bond purchases to take the total stock of these purchases to £435 billion, financed by the issuance of central bank reserves.  

Read The Bank of England statement in full below.

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Alex Brandreth, deputy chief investment officer at Brown Shipley, said: “Following the Bank of England’s decision to leave interest rates and quantitative easing unchanged today and the US’ decision to move interest rates higher last night, it is clear that the respective central banks of each country are moving in opposing directions on monetary policy.

“Whilst there were no changes today, the minutes of the meeting will provide some indication of how the Bank views risks in relation to the interest rate outlook in the UK post Trump, but with Brexit still casting a dark shadow over the outlook for the economy. This, on a backdrop of inflation moving higher in the UK due to sterling’s devaluation and the recovery in the oil price, paints an interesting picture as we start to look to the New Year.”

Shilen Shah, bond strategist at Investec Wealth & Investment, said: “Overall, it does look like the BoE is in a holding pattern as it tries to understand what the government’s Brexit strategy is and its impact on the UK economy.”

“In contrast to the BoE, yesterday’s Fed Fund increase by the FOMC is a clear indicator that US monetary policy is shifting up a gear. The FOMC also nudged up it guidance for 2017, with the central bank now looking for three rate hikes in 2017. Uncertainty over the new administration’s fiscal policy however remains a key area of uncertainty, with a large fiscal expansion likely to force the Fed to accelerate interest rate normalisation.”

Paul Whitlock, director of savings, Charter Savings Bank, said: “The Bank’s decision to hold rates means that many savers might not be getting as much in their stocking this Christmas. But with the very real prospect of rising inflation, 2017 could see savers enjoying some overdue festive cheer if interest rates were to rise early in the New Year. In the meantime, savers should use the festive period to think carefully about which New Year’s resolutions might help their money work hardest for them.”

Alistair Wilson, head of retail platform strategy at Zurich UK, said: “With inflation predicted to reach nearly 4% next year, there can be no doubt that households will face price rises. This is why it is so important to put in place a savings strategy to protect income against any future increases.

"In the current low interest rate environment, savers need to be proactive in finding the right investment. For example, investing small amounts regularly will reap rewards over the longer term particularly if saved into pensions where tax relief will boost funds."

SyndicateRoom CEO and Founder Goncalo de Vasconcelos said: ‎"Today's announcement serves as another reminder that we remain in an investor environment characterised by low returns and low liquidity. As rates remain at record lows, sluggish performance of traditional assets and perceived safe havens are forcing investors to look beyond the mainstream - and increasingly now, investors are looking to early stage investments for better returns."

The Bank of England statement in full:

The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment. At its meeting ending on 14 December 2016 the Committee voted unanimously to maintain Bank Rate at 0.25%.

The Committee voted unanimously to continue with the programme of sterling non-financial investment-grade corporate bond purchases totalling up to £10 billion, financed by the issuance of central bank reserves. The Committee also voted unanimously to continue with the programme of £60 billion of UK government bond purchases to take the total stock of these purchases to £435 billion, financed by the issuance of central bank reserves.

In the November Inflation Report, the Committee set out its projections for output, unemployment and inflation, conditioned on average market yields. Output was expected to grow at a moderate pace in the near term, but slow from the beginning of next year. In part that reflected the likelihood that household real income growth would slow and hence weaken household spending. It also reflected uncertainty over future trading arrangements, and the risk that UK-based firms’ access to EU markets could be materially reduced, which could restrain business activity and supply growth over a protracted period. The unemployment rate was projected to rise to around 5½% by the middle of 2018 and to stay at around that level throughout 2019. Largely as a result of the depreciation of sterling, CPI inflation was expected to rise to around 2¾% in 2018, before falling back gradually over 2019 to reach 2½% in three years’ time. Inflation was judged likely to return to close to the target over the following year.

Since November, long-term interest rates have risen internationally, including in the United Kingdom. In part, this reflects expectations of looser fiscal policy in the United States which, if it materialises, will help to underpin the slightly greater momentum in the global economy evident in a range of data since the summer. At the same time, however, the global outlook has become more fragile, with risks in China, the euro area and some emerging markets, and an increase in policy uncertainty.

Domestically, data released since the Committee’s previous meeting continue to indicate that activity is growing at a moderate pace, supported by solid consumption growth. Forward-looking components of business surveys are weaker than those regarding current output, however, suggesting that some slowing in activity is in prospect during 2017. The timing and extent of this slowing will depend crucially on the evolution of wages and how resilient household spending is to the pressure on real incomes from higher inflation.

Twelve-month CPI inflation stood at 1.2% in November, up from 0.9% in October and 1.0% in September. Looking forward, the MPC expects inflation to rise to the 2% target within six months. Since the Committee’s previous meeting, sterling’s trade-weighted exchange rate has appreciated by over 6%, while dollar oil prices have risen by 14%. All else equal, this would result in a slightly lower path for inflation than envisaged in the November Inflation Report, though it is still likely to overshoot the target later in 2017 and through 2018.

The MPC’s Remit requires that monetary policy should balance the speed with which inflation is returned to the target with the support for real activity. The lower level of sterling since the vote to leave the European Union has adversely affected that trade-off. Sterling’s effect on CPI inflation will ultimately prove temporary and fully offsetting it would require exerting further downward pressure on domestic costs, including wages, and would therefore involve lost output and higher unemployment. The Committee continues to judge that such outcomes would be undesirable and, consistent with its Remit, that it would therefore be appropriate to set policy so that inflation returns to its target over a longer period than the usual 18-24 months.

Equally, there are limits to the extent to which above-target inflation can be tolerated. Those limits depend, for example, on the cause of the inflation overshoot, the extent of second-round effects on domestic costs, the evolution of inflation expectations, and the scale of the shortfall in economic activity below potential. Inflation expectations at medium-term horizons had been somewhat below their past average levels, reflecting the period of below-target inflation, although some measures have risen more recently. The Committee continues to monitor the evolution of these expectations closely.

In light of these developments, and in keeping with its Remit, the MPC at its December meeting agreed unanimously that Bank Rate should be maintained at its current level. It also agreed unanimously to continue the previously announced asset purchase programmes, financed by the issuance of central bank reserves.

Earlier in the year, the Committee noted that the path of monetary policy following the referendum on EU membership would depend on the evolution of the prospects for demand, supply, the exchange rate, and therefore inflation. This remains the case. Monetary policy can respond, in either direction, to changes to the economic outlook as they unfold to ensure a sustainable return of inflation to the 2% target.