The Bank of England surprised markets by holding interest rates on Thursday, despite prior guidance from Governor Mark Carney that policy easing could be forthcoming.
Markets had priced in a rate cut of 25 basis points to 0.25 percent, which would have been the first change to the key rate since 2009. This followed financial market turmoil and economic and political uncertainty following to the U.K. public's vote to leave the European Union on June 23.
Instead, the bank's Monetary Policy Committee (MPC) voted by a majority of eight-to-one to hold the rate at 0.5 percent and unanimously to make no further additions to its £375 billion ($501.2 billion) quantitative-easing program. The one dissenting member, Gertjan Vlieghe, voted for a 25-basis point cut.
Sterling rose to a two-week high of $1.3480 on the news, while the international focused benchmark FTSE 100 trimmed some of its gains. The domestically focused FTSE 250, which tracks mid-cap companies, gained to trade up 0.4 percent.
Markets were surprised by the decision because two weeks ago, Carney publicly said "some monetary policy easing would likely be required over the summer," following the referendum. He did not specify what form easing might take or when exactly it might occur though.