The Bank of England held interest rates steady Thursday but said that a hike is likely to be needed in the "coming months."
The Monetary Policy Committee (MPC) voted by a majority of 7-2 to keep rates at a record low 0.25 percent but noted that a strengthening economy and inflationary pressures could prompt them to shift their policy stance sooner than anticipated.
Meantime, the committee agreed to maintain stock levels of government bonds at £435 billion ($574 billion) and corporate bonds at £10 billion ($13 billion).
"A majority of MPC members judged that, if the economy continued to follow a path consistent with the prospect of a continued erosion of slack and a gradual rise in underlying inflationary pressure then … some withdrawal of monetary stimulus was likely to be appropriate over the coming month," the central bank said.
The freeze in interest rates was largely anticipated by markets, however, the shift in language caused sterling to jump higher as investors sensed a more hawkish approach.
Sterling rose to $1.3317 against the dollar shortly after the announcement. It traded at 0.8923 against the euro.
The central bank said at its August meeting that it expects two interest rate hikes over the next three years, one more than previously estimated.
Source: Bloomberg Pro Terminal
Trader Bozhidar Arabadzhiev
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