The Bank of England has today (4 February) announced it is to keep the base rate at 0.5 per cent and pause quantitative easing.

Jeremy Cook, chief economist at World First, said, ‘It is time that the UK was weaned off these very expensive drugs that have kept us going for the past year. I expect, come the end of the month, an upward revision in the GDP figure will back up this decision to pause quantitative easing, alongside a recovery in retail sales, consumer confidence and the jobs market. We are not out of the woods by any stretch of the imagination but this was a very important step on the road to recovery.’

After a substantial fall in output, the UK economy recorded sluggish growth in the final quarter of 2009. Spending by households appears to have picked up a little, though that may partly reflect temporary factors.

The rate of decline in businesses' investment spending appears to have eased and the world economy continued to recover, raising the demand for UK exports.

CPI inflation has risen sharply to well above the 2 per cent target, reaching 2.9 per cent in December. That rise was largely accounted for by higher petrol price inflation and the reduction in the main VAT rate a year earlier dropping out of the calculation. Inflation is likely to have risen further in January, reflecting the restoration of the VAT rate to 17.5 per cent.