BoE keeps key interest rate to 0.5 per cent as expected (Reuters)

London (Reuters)-the Bank of England held its key interest rate to a record low 0.5 percent Thursday as concerns about recovering mediocre Britain outweighed any worries about inflation above target.

The decision of non-change was unanimously forecast from 60 economists in a survey by Reuters and will come as little surprise to markets.

While the European Central Bank Watch some increase rates later this session, money markets are not fully prices in UK rate hike until mid 2012.

UK interest rates have stood at 0.5 per cent by March 2009, when a deep recession and the threat of deflation asked the world's central banks to cut rates to record lows.

Since then, inflation in Britain has risen to more than double the target of 2 percent of the Central Bank, but the BoE was reluctant to tighten monetary policy at a time when the Government's austerity measures are already dragging down demand.

Surveys of production, construction and services this week suggest the economy expanded by just 0.3 percent from April to June, after having shown no growth at all in the previous six months.

And although inflation looks set to rise to 5 percent in the coming months, persistently weak growth concerns have also led some members of the monetary policy Committee to mull over the case for purchases of additional resources.

In June, two of the nine politicians of buoys, voted for a monetary tightening, a stimulus and the other six for the status quo. A breakdown of the vote on Thursday will be published within two weeks.

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