The Bank of England's Monetary Policy Committee (MPC) held interest rates at 0.5% today, while announcing plans to expand its quantitative easing program by £50 billion to £125 billion.

In a widely expected move, rates were left unchanged for the second month in a row.

However, the Bank of England said the world economy remains in 'deep recession'.

'In the light of that outlook and in order to keep CPI inflation on track to meet the 2% inflation target over the medium term, the committee judged that maintaining Bank Rate at 0.5% was appropriate,' the BoE said in a statement.

'The committee also agreed to continue with its programme of purchases of government and corporate debt financed by the issuance of central bank reserves and to increase its size by £50 billion to a total of £125 billion. The committee expected that it would take another three months to complete that programme, and it will keep the scale of the programme under review.'

Earlier this year the Chancellor Alistair Darling authorised the Bank of England to buy up to £150 billion of bonds as part of the programme.

The Bank of England statement said that while the current inflation figure of 2.9% remained above the target of 2%, the degree of spare capacity in the economy had increased and the loosening in the labour market had contributed to a 'sharp easing' in pay pressures.

Therefore, it expected CPI inflation to fall below 2% later this year, also pushed lower as food and energy price pressures diminished.