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Bank of England holds fire on interest rate

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The Square Mile- London's Financial District

One gauge of market interest rate expectations priced in a 60 percent chance of a May rate rise, down from 70 percent before the decision, and the probability of a further rise during 2018 fell to less than 50 percent.

The transition deal, which is expected to be confirmed Thursday at a meeting of European Union leaders, has, according to many economists, made it even more likely that rates will be raised in May, alongside the next set of quarterly economic projections from the Bank.

The Bank of England kept interest rates steady on Thursday but two policymakers unexpectedly voted for a hike, boosting confidence among investors that borrowing costs will rise in May for only the second time since the 2008 financial crisis.Ian McCafferty and Michael Saunders - the first officials to call for rates to rise previous year - said it was now time to push them above the emergency level at which they have sat for most of the past decade.

"Our Monetary Policy Committee has voted by a majority of 7-2 to maintain Bank Rate at 0.50 percent", said a statement following a regular meeting.

Ian McCafferty and Michael Saunders - who were the first to call for a rate rise past year - are seen as outside candidates to vote for a rate rise this month.

The decision saw the first split vote on the MPC since rates were raised last November, from 0.25% to 0.5%. Sterling's seven-week high against the dollar, shortly after noon on Wednesday, came as two members of the bank surprised investors by calling for a rate increase.

This could discourage the BoE from continuing to pursue a course of tighter monetary policy, given the significant impact that Brexit-based uncertainty could still have on the strength of the domestic economy.

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The Bank has been paving the way for a rate rise, but must tread lightly until there is richer evidence of growing inflationary pressures, to avoid unnecessarily placing a speed bump in the way of economic activity'.

No economist polled by Reuters expected the BoE to repeat November's 25-basis-point rate rise on Thursday, and only a minority expected Saunders or McCafferty to vote for a rise.

Average wage growth has also moved closer to inflation meaning consumers are not seeing wages decrease whilst the costs of goods increase.

In a speech given at HMT's International Fintech Conference yesterday, the Bank of England's deputy governor, Dave Ramsden, said the Hub will be a central point of contact for the fintech sector to engage with the Bank.

United Kingdom economic data today has been mixed, showing growth in month-on-month retail sales during February but slowing year-on-year activity.

The UK labour market is approaching, if not already at, what the Bank of England describes as full employment.

Burton Mills' economists stated that some members of the Monetary Policy Committee may be in favor of a rate hike as soon as this month but that the other members are expected to hold fire until May when Britain's economic outlook is revised.

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