Rate-sensitive short-dated British government bond yields dropped on Thursday and real-estate stocks rose, after the Bank of England raised interest rates by 25 basis points, a step down in the pace of monetary tightening from its previous meeting.
"The recent fall in inflation and signs of a faltering economy meant that the MPC felt it had enough room to revert back to a 25bps rise in August," said Thomas Pugh, an economist at RSM UK.
The pound fell by as much as 0.66%, hitting a fresh one month low after the meeting's outcome. It was last at $1.266, 0.4% lower on the day, roughly where it was before the announcement. Market expectations for the Bank Rate peak reached 6.5% in mid July before falling back to 5.75% before the decision after a sharp decline in consumer price inflation which echoed declines elsewhere in the world, particularly the United States. After the BoE's move, traders saw rates peaking at 5.71% in March.
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