The Bank of England has avoided temptation to raise interest rates despite the Federal Reserve hiking the US rate.

The markets were waiting in trepidation to see how Bank Of England governor Mark Carney and his colleagues on the monetary policy would react this week after months of hinting UK rates were set to rise soon.

The UK rate has sat at a record low of 0.5% since March 2009.

The US Federal Reserve ratcheted up interest rates from 0.25% to 0.5% after sitting at the record low for almost a decade.

Pundits expect the UK rate to move up to 1.75% by the end of the year and mortgage rates are expected to rise in line with any increase.

In recent speeches, Carney has indicated he expects the ‘new normal’ for interest rates to settle between 3% and 5% by 2020.

Despite the International Monetary Fund (IMF) commenting that the UK is the only other major economy except the US in an economic position to increase interest rates, Carney is holding back until the country shakes off low inflation.

With the rate hovering around 0% against a desired rate of 2%, the Bank fears moving too soon to increase the cost of borrowing could impact on economic recovery.

The monetary policy committee voted 8 to 1 to keep the rate at 0.5% and to keep economic data under review.

“We expect the rate to rise gradually and to a level lower than in previous economic cycles,” said a Bank spokesman.

“This is guidance not a promise and the actual path of rate increases over the next few years will depend on economic circumstances both at home and overseas.”

Economists and fund managers agree an interest rate rise in the UK is inevitable this year, but differ about the timing.

Maike Currie, investment director for personal investing at Fidelity International, said: “Many investors have questioned how quickly the Bank of England will follow the Fed’s lead in making the first move upwards on rates.

“While there is no formal link between US and UK interest rates, historically these have tended to move in tandem with typically a six to nine month lag.”

Research by the Council of Mortgage Lenders, the trade body for the majority of buy to let lenders, claims three-quarters of landlords would still cope with mortgage repayments, even if interest rates increased significantly.

A 1.5% rise over three years would be met from rents, according to two thirds of landlords.