Interest rates have been kept on hold at 0.5 per cent by the Bank of England’s Monetary Policy Committee (MPC).

It was a largely expected move as was the decision to pump no more money into the quantitative easing programme, which has already benefited to the tune of £200 billion.

At the Centre for Economics and Business Research (CEBR), senior economist Charles Davis pointed out that monetary policy is effectively in limbo “until the scale and pace of fiscal tightening becomes clear” and that will not happen until after the General Election.

“This uncertainty has led to markets becoming increasingly edgy about the United Kingdom economy – with sterling sliding to a 10-month low against the dollar on Monday. It is clear that both the Bank of England and markets are in need of clarity on the policy mix ahead,” Mr Davis said.

He added that there were other reasons, too, for the MPC’s caution.

“In early 2010 there have been signs that the consumer spending recovery is stumbling as real growth in household incomes remained weak. Indeed, retail sales declined sharply in January as the VAT rate was reversed.”

Mortgage lending, too, fell sharply in January following the end of the stamp duty holiday.