The pound lost ground on Thursday after the Bank of England left UK interest rates unchanged at it policy setting meeting. While the majority of analysts were expecting UK interest rates to remain on hold at 5.25 per cent, there was some nervousness ahead of the decision in the wake of last month’s surprise 25 basis-point rate rise.

“The decision to leave interest rates unchanged suggests that the January move was not the start of a series of rate increases in the UK, and we now believe that 5.25 per cent will probably be the peak in official interest rates,” said Chris Iggo, senior strategist at Axa Investment Managers.

According to Mr Iggo, the members of the central bank’s monetary policy committee would have discussed the contents of the UK Inflation Report, due for release next Wednesday, and must have concluded that the level of interest rates now prevailing was consistent with inflation falling to its 2 per cent target.

The pound fell 0.6 per cent to $1.9590 against the dollar and dropped 0.3 per cent to £0.6625 against the euro. Meanwhile, the euro was little changed after the European Central Bank, as expected, left eurozone interest rates unchanged at 3.5 per cent. The euro eased 0.2 per cent to $1.2989 against the dollar.

Source: Financial Times