LONDON: Sterling fell to day's lows and gilt futures rebounded on Thursday after the Bank of England seemed in no rush to raise interest rates in its latest inflation report, despite jacking up its growth forecasts as expected.
In a sign of a developing split among policymakers, the BoE said some of its rate-setters had "moved a little closer" to their limits for tolerating an overshoot of the Bank's 2 percent inflation target, caused by sterling's slide since June's Brexit vote.
But the bank also stuck to its line from November that monetary policy could still go in either direction and its forecasts assumed a first rise in rates would not happen until the end of next year.
Sterling fell to as low as $1.2600 after the report, down from $1.2672 before its release and leaving it down 0.4 percent on the day. It had earlier hit a seven-week high of $1.2706. Against the euro, its hit the day's low of 85.74 pence.
British gilt futures rebounded from a brief dip to gain around 10 ticks after the decision. They were last up 22 ticks on the day at 123.60. The 10-year gilt yield was little changed, still down a basis point on the day at 1.44 percent.
"The market had got itself quite 'bulled-up' (on sterling) ahead of this," Societe Generale FX strategist Alvin Tan said.
"But there weren't really any surprises. The improved outlook was expected, 9-0 (vote count to keep rates on hold) was expected, so it definitely needed a much more hawkish tone to keep it (sterling) up."
Britain's blue-chip FTSE 100 extended gains, with the benchmark index last trading 0.3 percent higher.
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