Interest rates held at 0.5%

The Bank of England today chose not to follow US counterparts into another round of emergency measures to prop up the economic recovery.

Policymakers held interest rates at an historic low of 0.5% and resisted pressure to pump more cash into the economy, despite fears surrounding the Government's deficit-busting spending cuts announced last month.

Although there is likely to have been another three-way split in the nine-strong Monetary Policy Committee (MPC), economists suspect recent better-than-expected economic data steadied the hands of those in the no-change camp.

Last night, the US Federal Reserve unveiled a second quantitative easing programme of 600 billion US dollars (£372.8 billion) - dubbed QE2 - in a bid to kick-start the lagging recovery.

City expectations that the MPC would follow suit today cooled after higher-than-expected third quarter GDP growth of 0.8%, as well as upbeat data from the manufacturing and services sectors.

The good mood was bolstered today as the FTSE 100 Index hit a two-year high on the back of dollar weakness and the Halifax reported a moderate rebound in house prices following a sharp fall in September.

Analysts suspect the Bank will reveal its QE2 package early next year - possibly injecting a further £50 billion on top of the existing £200 billion - as the country starts to feels the pain of austerity measures.

The MPC has not changed rates for 19 months in a row, while it last increased QE 12 months ago, when it upped the programme by £25 billion.

Minutes of last month's MPC meeting showed that one member - Adam Posen - called for a £50 billion hike in QE, while Andrew Sentance maintained his vote for a rate hike to 0.75% to calm inflation.

Mr Posen previously warned of a potential Japan-style "lost decade" of stagnant growth if further moves are not made.

But the Bank is also battling against stubbornly high inflation, which remained at 3.1% in September - well above the Bank's 2% target.

The pound strengthened after today's decision, hitting its highest level against the dollar since January at 1.62. This also takes into account the severe weakening effect the Fed's QE2 package has had on the greenback.

The US central bank said it would roll out its second batch of monetary stimulus incrementally over the next eight months.

The US previously injected some 1.7 trillion US dollars into the economy through quantitative easing at the height of the recession.

Confronted with unemployment of nearly 10% and critically low inflation, the Fed decided it was appropriate to pump more cash into the world's largest economy.

More details on today's rates decision and the MPC voting result will be made public on November 17 when the minutes are released.

Howard Archer, chief European and UK economist at IHS Global Insight, said sticky inflation and decent economic activity would have made most MPC members reluctant to vote for further QE "for now at least".

He said: "Nevertheless, despite recent resilient economic data and surveys, serious concerns and uncertainties remain about the economy's future strength with the substantial fiscal tightening set to increasingly kick in over the coming months, including January's VAT hike."

Philip Shaw, chief economist at brokers Investec, said: "While we would not totally disregard the possibility of further QE at some point, the MPC will still be nervous about high prevailing rates of inflation and the possibility that these become entrenched over the longer-term.

"Recent brighter news on the economy would probably have to swing sharply into reverse to prompt the committee to restart QE."