The Bank of England (BoE) left interest rates and its asset purchase target unchanged on Thursday, amid concerns that a strong sterling could be choking off a recovery in the U.K. economy.
As expected, the bank decided to hold off on adding to the £375 billion ($628 billion) of asset purchases it has unleashed over previous years and kept its main benchmark rate at a record low of 0.5 percent. Despite not announcing any change in policy, the Old Lady of Threadneedle Street is poised for action in the not-too-distant future with BoE Deputy Governor Minouche Shafik saying on Wednesday that it's likely to lower its estimate of the spare capacity in the U.K.'s economy next month.
Such promising words have fueled yet more speculation that rates could rise, even at some point this year, which would benefit sterling with potentially more yield. The pound has soared this year in anticipation of such a move. In January it was trading at 1.6555 against the dollar but has recently ripped through the $1.70 level and was trading at $1.7119 on Thursday morning, seeing little change after the rate decision.