Central Banks

Bank of England keeps key rate at record low of 0.5%

Bank of England keeps base rate unchanged
Bank of England keeps base rate unchanged

The Bank of England has decided to hold rates at 0.5 percent once again, a record low for seven years.

All nine members of the BoE's Monetary Policy Committee (MPC) voted to hold on to low rates amid concerns over global growth and uncertainty ahead of a Brexit vote.

Ahead of the decision, the FTSE stood lower, led by weak earnings from Burberry and Persimmon, and sterling was down 0.2 percent after weekly highs of 1.437 against the USD this week.

The bank has been in no hurry to raise rates, and, with uncertainty over the referendum on the U.K.'s membership of the European Union in June, many anticipate it will wait and watch for any impact from the decision on the UK economy. The BoE Governor Mark Carney had warned in March that uncertainty over the EU referendum could hit the UK economy. It also added that the referendum may delay some spending decisions and depress growth.

"Mark Carney joins a select group of financial heavyweights who have wasted no time in voicing their fears on the potential damage a Brexit may have in the UK, Europe, and global economy," Lukman Otunuga, an analyst at ForexTime Research says in a note sent to CNBC via email. He further explains that with speculations rising about a potential Brexit, the BoE may consider slashing rates rather than hiking.

However, the delay in raising rates has been a concern for those who warn that the UK economy may get used to a low-rate environment. Earlier today, Andrew Sentence, ex-MPC member tweeted that weaning an economy off ultra-low rates will be more difficult, the longer it is delayed.

A Reuters poll of economists found that the BoE is expected to leave interest rates at a record low until 2017 amid fears of slowing global growth and inflation nowhere near target. The poll states that any hikes will be gradual and the initial 25 basis point increase may be followed by further moves in the second and fourth quarters of next year.

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