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The Bank of England has opted to keep rates on hold at five per cent despite fears that the UK is falling into its first recession in 20 years. This is the fourth month rates have remained unchanged since they peaked at 5.75 per cent last year.

Richard Lambert, director general of the CBI, says, ‘The latest data show the slowdown in UK economic activity gathering pace, and business and consumer confidence falling further.

'However, with inflation heading higher in the next couple of months, the Bank is right to leave rates on hold for the time being.’

The Bank's reluctance to cut rates to spur growth is due to the fear of inflation, which is already almost double the government's target of two per cent.

Darren Stevens, director of customer services at Chelsea Building Society, comments, ‘Unfortunately, “inflationary pressure” is no longer an abstract economic term. Normal people, up and down the UK, are struggling daily and the last thing their finances needed was another base rate rise.

‘Already, millions of Britons are using their savings to pay for daily essentials such as food, rent and mortgages and 15 per cent have used their savings to pay for bills such as council tax. With 13 per cent of Britons however starting to save less, this is a strategy that is not sustainable long term and will lead to debt problems.’

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