Interest rates in the UK were held at their record low of 0.5% amid growing fears that the world economy is heading back into recession, the Bank of England announced Thursday. The Bank's decision to keep rates on hold for the 29th month in a row comes a day after the FTSE 100 Index slumped 2.3% in its biggest one-day drop since November last year. The pressure on Bank policymakers has intensified in recent days after the continuing debt crisis in the eurozone gripped Italy and Spain, fuelling fears that the pair will need Greek-style bailouts, analysts said. The Bank warned at its meeting last month that the risks posed by a deteriorating European debt crisis were substantial for the UK. Economists now think that rates could remain on hold until well into next year due to the country's uncertain growth prospects. The head of the UK's tax and spending watchdog conceded today that experts expected its growth forecasts for this year to be missed. Robert Chote, who chairs the independent Office for Budget Responsibility, said there "aren't many people" expecting annual growth to reach the 1.7% it anticipated in March. The deterioration has fuelled speculation that the Bank will engage in a second bout of money-printing to stimulate the economy. The Bank's nine-strong monetary policy committee has recently discussed the possibility that it will increase the stock of quantitative easing, printing money, beyond 200 billion pounds, in a move that would see it pump more cash into businesses in the hope it will trickle down through the rest of the economy. The committee will have the benefit of the Bank's latest quarterly inflation and growth forecasts due to be published next Wednesday. They are expected to show that inflation, which was running at 4.2% in June, will push above 5% this year before heading back towards 2% in 2012. Growth forecasts for 2011 are also likely to be downgraded from the 1.7% prediction in the last report in May. The National Institute of Economic and Social Research and the CBI have both downgraded the UK's growth forecasts for 2011 to 1.3% in recent days. GDP slowed to a lacklustre 0.2% in the second quarter of 2011 after consumers reined in spending as their pay failed to keep pace with the rising cost of living. And there has been more worrying news for the UK economy after a survey revealed the manufacturing sector - the main driver of growth in recent months - contracted in July for the first time in two years. The UK's third biggest lender, Nationwide group, was this week one of a number of lenders to drop rates when it said it will reduce all five-year fixed mortgage deals by 0.1% and all two-year trackers by 0.15%. However, the extended period of lower lending costs spells more misery for pensioners and savers who will continue to suffer low returns on their money, at a time when high inflation is eroding the value of their deposits, the analysts noted.