Interest rates are expected to remain unchanged as rate-setters at the Bank of England begin to assess the impact printing new money has had on the economy.

The Monetary Policy Committee (MPC) already decided to freeze rates last month and it is expected to do the same again to allow the different economy boosting measures to take effect on the UK's recession-hit economy.

These measures include slashing rates to a record low of 0.5% and quantitative easing to pump £75 billion of newly created money into the economy in March.

It is now possible that following sharp rate cuts the MPC will decide to leave interest rates unchanged at 0.5% for the rest of the year with its attention focused on the quantitative easing, which started in March.

JP Morgan economist Allan Monks said he expects the MPC will agree to leave rates at their current level and instead finish off the initial phase of its programme of quantitative easing (QE).

He said: "We then expect a pause from the MPC while it assesses the impact of its actions to date.

"Our bias has been towards further purchases later in the year (we currently have an additional £25 billion pencilled in for November)."

It is thought any further rate cuts would impact on banks' margins and as a result would limit their willingness to lend.

As a result the MPC are likely to shift to the pace of QE, knowing it has the possibility to create up to £150 billion if necessary.

So far the Bank has spent just over £50 billion.

The predictions come after the Bank released its latest lending survey at the end of April showing a mixed picture.

Major lenders reported only a limited improvement in mortgage supply since the beginning of the year, but some indicated a willingness to make more credit available to businesses and individuals.

But since their last meeting, the UK economy has plunged further into recession, with a shock 1.9% dive in output during the first three months of 2009.

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