The decision to hold interest rates at a historic low has been welcomed by business leaders in the West Midlands.

The Bank of England will end the year as it started after policymakers held interest rates at 0.5 per cent for the 20th month in a row and maintained money-boosting efforts at £200 billion under the Bank’s quantitative easing (QE) programme.

Stronger-than-expected economic growth and an improved performance in the manufacturing sector in recent months has steadied the Bank’s hands, despite expectations of a slowdown in the pace of recovery in the months ahead.

And the decision has been backed in the region. Louise Bennett, the chief executive of the Coventry and Warwickshire Chamber of Commerce, said: “When interest rates fell to 0.5 per cent in March 2009, many thought it was a temporary step but it could remain at that level for more than two years.

“There is a pull in both directions for the MPC. Inflation is higher than the target figure and the economy has grown this year but we have a VAT rise and the effects of the Government cuts to come.

“So we believe it is correct to maintain interest rates at this level until there are genuine signs of a sustained, long term economic recovery and it appears that the MPC will continue with this policy until that becomes apparent.”

Mark Smith, regional chairman at PwC in the Midlands, said: “Despite concerns over rising inflation, economic recovery continues to be the overriding priority of the committee. As such any change in monetary policy would have been a major surprise.

“Looking ahead, given the mixed picture on the overall health of the economy, we’re likely to see interest rates remain on hold until well into 2011. There may well also be a need to extend quantitative easing and Midlands businesses will take comfort from the fact that the committee is keeping its options open should the recovery show signs of faltering in the New Year.”

Christine Braddock, President of Birmingham Chamber of Commerce, said: “Birmingham’s annual GVA is predicted to reduce by £735 million by 2015, around four per cent of economic output. This equates to an average decline in economic growth in the city of 0.9 per cent a year over the next four years. So interest rates still need to remain unchanged.

“However, the Monetary Policy Committee will be forced into a rise soon as inflation remains at over three per cent, a figure which has been retained for every month of 2010.”