By Jonathan Davies

The ongoing financial crisis in Greece affected the Bank of England's decision not to raise interest rates this month.

According to minutes from the Bank's Monetary Policy Committee (MPC) meeting, which sets interest rates, the situation in Greece was "a very material" in the decision making of "a number" of the committee's nine members.

The MPC voted unaninmously in favour of keeping rates at the record low of 0.5%, where they have been since March 2009.

The minutes showed that some members of the MPC believed that raising rates, combined with the concern over Greece, could increase the risk of inflation growing above the Bank of England's target of 2%.

Chris Williamson, an economic analyst and Markit, said: "The barriers to hiking rates have steadily come down. The economy retains strong growth momentum... with the pace of expansion picking up after a lull due to the general election. [The economy is] running at levels that are historically consistent with the Bank raising interest rates to start to cool things down a little."

The Institute of Directors (IoD) is calling on the Bank of England to raise interest rates as soon as possible.

IoD chief economist James Sproule said: “Now, more than ever, is the time to start normalising interest rates. Extraordinary low interest rates were justified when our economy was in the doldrums. Now that is no longer the case, the Bank of England needs to reassess its policy. With the UK leading the G7 in terms of growth, and unemployment low and wages rising at their fastest rate since before the crash, our economy is well-placed to start bringing interest rates back to a more normal level.

“Inflation may be hovering around zero, but for monetary policy to be effective, interest rates need to be at a level where they can, if needed, stimulate the economy. Quantitative Easing should not be seen as a substitute for a long term policy on interest rates.

“The longer interest rates languish at a historic low, the harder it will be for Mark Carney to raise them ‘slowly and gradually’. The earlier the process of normalising rates starts, the smoother the course will be, and the longer the economy will have to adjust and prepare. If rates do not begin to return to a more sustainable level soon, the Bank of England will be defenceless when the next crisis strikes, and unable to support the economy by shifts in monetary policy.”