Bank of England Holds Benchmark Rate Steady

LONDON — The Bank of England agreed Thursday to keep its key interest rate unchanged on Thursday because of growing concerns that the debt crisis in Europe could push Britain’s economy back into recession.

The central bank left its benchmark interest rate at a record low of 0.5 percent. It also kept its bond purchasing program at £275 billion, or $441 billion, after increasing it by £75 billion last month in an attempt to help a weakening economy.

“The economic outlook has deteriorated over the last month,” Philip Shaw, an economist at Investec Securities in London, said. “The economic data suggested the U.K. could come close to a recession.”

Britain’s economic recovery is tightly linked to developments on the European Continent, where problems in Greece spread to Italy, which is struggling to calm investors and keep borrowing costs down.

The group of nations that share the euro as a common currency is Britain’s biggest export market, and Prime Minister David Cameron has repeatedly said that it was in Britain’s interest to find a solution for Greece’s debt problems and stabilize the euro.

Britain is a member of the European Union but not part of the euro zone.

Some economists said the Bank of England could decide to increase its bond-purchasing program further in the first quarter of next year if the economic outlook deteriorates. In an attempt to help economic growth in Europe, the new president of the European Central Bank, Mario Draghi, last week cut the benchmark rate to 1.25 percent to 1.5 percent.

There was a 50 percent chance that Britain’s economy could slip back into recession, the National Institute for Economic and Social Research said this month. British households are being squeezed as the government and many companies froze pay while costs for food and other items rose. Inflation is currently at 5.2 percent, more than double the central bank’s 2 percent target.

“The biggest threat to the British economy right now is uncertainty itself,” George Osborne, the Chancellor of the Exchequer, said in a speech to British entrepreneurs on Tuesday. The concerns are “rising energy prices, euro zone debt markets in turmoil, an international crisis of confidence,” he said.

In a sign that concerns about rising living costs and unemployment among some consumers translated into lower spending, retail sales fell 0.6 percent in October from a year earlier, according to the British Retail Consortium released Tuesday. An index of manufacturing also declined last month.

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