Bank of England maintains policy rate

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The Bank's Monetary Policy Committee (MPC) voted 7-2 in favour of leaving interest rates on hold at 0.5%.

Mark Carney, Governor of the Bank of England, addresses the media during the quarterly Inflation Report press conference in London, Britain May 10, 2018.

And while Brexit-fuelled inflation has fallen sharper than expected in recent months, the Bank said rate hikes would still be needed over the next three years, with cost pressures building in the economy.

It added it continued to believe an "ongoing tightening of monetary policy over the forecast period would be appropriate".

Investors slightly pushed back their bets on when rates would rise, and sterling slid close to a four-month low against the dollar while the yield on two-year British government bonds edged down. Versus the euro, the pound slumped 0.7% to around 1.13.

"It looks like the 2018 rate hike has been delayed not cancelled", Fitch Ratings chief economist Brian Coulton said. Money markets now fully price a rate increase by November.

Chris Williamson at IHS Markit added: "The unchanged medium term outlook leaves expectations alive for rates to rise later in the year, likely August".

GDP growth was recorded as being just 0.1 per cent for the first three months of 2018, the lowest rate of growth since 2012 and well below forecasts. Carney has been labeled an "unreliable boyfriend", having already in the past flagged up a rate hike only to back out later.

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He said households and businesses "expect us not to be on some preset course".

Across April it was revealed that United Kingdom wages rose 2.8 percent, unemployment dropped to its lowest for 43 years, manufacturing orders hit their highest since 1988, exports rose a massive 10.4 percent, and Sterling hit a post-Brexit high of $1.4377 - up six percent on the year.

Away from economics, the FTSE was boosted by a 3.8 percent move higher in RBS' shares after it agreed to pay a smaller-than-expected $4.9 billion to resolve a US investigation into its sale of mortgage-backed securities. The MPC members want to wait and see how economic data unfolds before making a decision, and all members agreed that any future increases in interest rates are "likely to be at a gradual pace and to a limited extent".

Ian McCafferty and Michael Saunders again preferred a quarter point increase in rates as they judged the weakness in the first quarter GDP data to be temporary or erratic, heavily affected by adverse weather.

The bank forecast inflation to slow to 2.1% by the second quarter of 2019 before easing to 2% by mid-2020.

"Sadly, Carney's negative political position on Brexit continues to bring the independence of the Bank of England into question".

However, Carney also noted that the "economic outlook for the United Kingdom remains clouded by Brexit uncertainty", despite an agreement on a transition deal between the country and the European Union being welcome.

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