LONDON, Sept 4: The Bank of England kept its key lending rate unchanged at 5.0 per cent on Thursday, opting against a cut despite a looming recession in Britain in order to keep up the fight against soaring inflation.

As widely expected, the BoE’s nine-member monetary policy committee left British borrowing costs at the same level for a fifth month running after its latest monthly rate-setting meet that began on Wednesday.

The Bank of England will offer reasons for its latest decision when it publishes minutes of the two-day meeting on Sept 17.

“Despite the very real danger of recession, it was always likely to prove premature for the Bank of England to cut interest rates, given well above-target and rising inflation, still significant medium-term inflation risks and the weakness of the pound,” said Howard Archer, chief Britain economist at Global Insight.

The European Central Bank also left its main lending rate unchanged at 4.25 per cent on Thursday, while the Swedish central bank raised borrowing costs by a quarter of a per centage point to 4.75 per cent to counter inflationary pressures. US borrowing costs stand at 2.0 per cent.

“Inflationary pressures are doubtless keeping the minds of the central bankers highly focused but we do need to bear in mind that oil prices have fallen dramatically over the last six to eight weeks and this will start feeding through to a degree in the future,” said CMC Markets analyst James Hughes.

The Organisation for Economic Co-operation and Development had stated on Tuesday that the British economy would be in recession over the second half of 2008.

The forecast came after finance minister Alistair Darling warned in a newspaper interview that Britain faced “arguably the worst” economic downturn in 60 years and it would be “more profound and long-lasting” than expected.—AFP