LONDON: Sterling edged down on Thursday ahead of a Bank of England meeting which may prove a watershed on the road to higher interest rates despite growing doubts over the pace of Britain's economic recovery.
The BoE's Monetary Policy Committee (MPC) finishes its latest two-day meeting today, but markets will have to wait for another two weeks to find out whether any of the nine members has voted for an interest rate rise.
Some analysts believe a first dissenting voice is possible and would point the way to a rise in interest rates from record lows of 0.5 percent, where they have been for more than five years.
Sterling lost ground against the dollar on Wednesday, when industrial and manufacturing output data added to doubts over whether growth will prove strong enough in the coming months to prompt a rate hike by the end of 2014.
"Whatever way the economic data has been going, we've been stuck at about a 50 percent probability of a rate hike by the end of the year, and that's not really budged (since) the huge rerating we had after the Mansion House speech," said Adam Cole, global head of currency strategy at RBC Capital Markets, referring to a speech by BoE Governor Mark Carney in June.
"Whether that 50 jumps up to 100 or drops back towards zero will be the determinant of where sterling goes."
Sterling inched down 0.1 percent against the dollar to trade at $1.6840. The euro was flat against the pound at 79.20 pence.
No analysts in a Reuters poll expected the bank to change its policy settings on Thursday.
"Although the debate itself on the whether/when to finally raise the bank rate is of interest to us, the minutes of the meeting will not be released until 20 August," said analysts from ING in a morning note.
"We expect at least one MPC member - Martin Weale - to vote for a rate hike."
Later on Wednesday the European Central Bank will hold its monthly news conference, starting at 1230 GMT. The ECB is also expected to leave interest rates - currently at 0.25 percent - on hold, as it assesses the impact of its last round of stimulus.
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