The economy is currently experiencing an uplift, albeit marginal. The 0.5% growth spurt in the first quarter of 2011 has cancelled out the sudden 0.5% contraction experienced at the close of 2010 due to poor weather. However, the Purchasing Managers' Index (PMI) for services, which measures confidence in the sector, saw a sharp drop from 57.1 to 54.3 last month.
Fearing that the government's austerity measures will continue to bite, the Bank has erred on the side of caution, freezing rates.
Chris Williamson, chief economist at Markit, explains: "There's been a significant loss of momentum. It's particularly linked to government spending cuts. What companies were saying in the first quarter was that there was a surprisingly strong increase in spending from government departments, and that has now gone into reverse."
Have your say. Leave a comment below.