Birmingham business leaders have backed the Bank of England’s decision to hold interest rates at 0.5 per cent, saying it will help economic recovery in the West Midlands.

The Bank held off from pumping more emergency cash into the economy amid fears that inflation is not falling back as quickly as expected.

The most recent £50 billion injection into the Bank’s quantitative easing (QE) programme took place in February but members of the monetary policy committee (MPC) have vetoed increasing the stock of asset purchases from £325 billion.

Despite the UK’s return to recession in the first quarter and renewed tensions in the eurozone, it is likely that members were influenced by inflation remaining stubbornly high at 3.5 per cent in March, against expectations that it will meet the Government’s two per cent target by the end of this year.

Michael Ward, president of Birmingham Chamber of Commerce, said: “Interest rates have been at 0.5 per cent since March 2009 and have played a key role in nurturing the tentative signs of growth reported in the British Chambers of Commerce Quarterly Economic Survey.

“The current low interest rate is vital in nurturing the fragile shoots of recovery from the region’s businesses.”

Mr Ward added that the Bank of England faced pressure from some quarters to raise interest rates to counter the inflationary pressures but as they are mostly from external sources, such as the increase in commodity prices, this would be relatively ineffective.

He added: “Britain’s exposure to the eurozone economies, which the markets are jittery about in the light of recent European elections, and potential reduction in commitment to austerity measures, reinforces the need for continuity and stability in the UK’s monetary policy.

“The Government’s austerity measures – spending cuts and tax rises - mean that unemployment is likely to remain high and there will be spare capacity in the economy.

“Any concern over inflation should be secondary to the need to keep business conditions conducive to growth.”

Mark Smith, regional chairman at business advisors PwC in the Midlands, added: “The difference between the headline base rate and the actual cost of borrowing for many corporates and individuals widened in the first quarter of 2012.

“This is holding back business investment. Greater certainty in the Eurozone and a more stable economic recovery are needed before lenders will have the confidence to reduce the premiums they charge over official base rates.”

Mike Ashton, spokesman for the West Midlands Chambers of Commerce, said: “The British Chambers of Commerce’s Quarterly Economic Survey has given us some good indicators that some sectors are starting to recover, despite the overall economy hovering at a standstill or tipping into a technical recession. Wage growth remains low which means that there is low underlying inflation.

“It is essential that the Bank of England’s focus remains on keeping interest rates low in order to maximise the ability of business and industry to invest and expand.

“Any rise in interest rates would hit businesses attempting to borrow and would reduce householders’ disposable income by pushing up mortgage repayment rates.

“There is clearly no room for complacency and the focus on pro-growth and pro-business measures must be the Bank of England’s priority.”