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The previous change in Bank Rate was a reduction of 0.25 percentage points to 5.25 per cent on 7 February 2008.

Clear need for further cuts 

Commenting ahead of the MPC’s interest rate decision on Thursday, David Kern, economic adviser to the British Chambers of Commerce, said that most analysts expected the MPC to keep interest rates on hold today, but added that delaying would be a mistake.

He explained that global and domestic economic circumstances had deteriorated since the February meeting.

"We believe that there is a clear need for a further cut in rates to 5 per cent. Inflation remains a danger and the Bank of England must of course act with caution. However, the threats to growth are more urgent at present and preventing a downturn must be the top priority in the near future," he said.

Kern pointed out that British business had so far remained remarkably resilient in the face of worsening threats.

"Unless urgent action is taken to alleviate the credit crunch we will face growing risks that confidence will crumble. If this occurs, the MPC would be left with more dangerous and more unpalatable options in the long term,” he concluded.

Short-term inflationary pressure 

CBI chief economic adviser Ian McCafferty said that the MPC was well aware of the intensifying short-term inflationary pressure from rising food and energy costs and needed to balance this against the weakening of the economy we are experiencing.

“It is worrying that public expectations of inflation are rising and may yet feed through, via wages, into a more ingrained pick up. Holding rates shows the Bank is determined not to compromise its mandate. But the slowing economy and the implication for inflation further out does suggest that, following January’s decision, another cut in interest rates will be needed and I would expect it sooner rather than later,” he added.

Edward Menashy, Chief Economist at Charles Stanley, said that problems were rapidly returning to the credit markets with the three month interbank rate rising to 5.74 per cent from 5.50 per cent.

"Bank shares are beginning to decline again despite the better than expected figures and the more generous dividend payouts. Concern is rising. Rising commodity prices will probably oblige the Governor to write a letter of explanation as to why the inflation target has been missed by the autumn,” Menashy added.

The minutes of the meeting will be published at 9.30am on Wednesday 19 March.

• Bank of England 
• British Chambers of Commerce