Interest rates held amid warnings

The Bank of England left interest rates on hold at record lows today in the face of warnings of the biggest loss of momentum for the British economy since the collapse of Lehman Brothers.

The widely expected decision leaves borrowing costs on hold at 0.5% for the 26th successive month and marks the failure of rate hawk Andrew Sentance's last bid to push through a rate rise before stepping down from the monetary policy committee at the end of the month.

The vote came after signs of slowing growth for the powerhouse services sector - accounting for three-quarters of output - from the Chartered Institute of Purchasing and Supply. Its activity index, where a score over 50 shows expansion, slipped from 57.1 to 54.3 in April.

Combined with weaker growth for manufacturers and construction firms, financial information firm Markit said the trio of April surveys "indicated the largest loss of growth momentum seen since just after the collapse of Lehmans in late 2008".

Markit forecasts that the UK economy will grow 0.4% in the second quarter - even slower than the tepid 0.5% expansion in the first three months of 2011 - although factors such as an extra public holiday for the Royal Wedding make the figures less certain.

Fears over growth have dominated despite inflation at 4%, double the MPC's 2% target. The committee is convinced that inflation will fall back towards target next year as factors such as January's VAT increase drop out of the figures