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The Bank of England held its benchmark interest rate at 5.25% Thursday.
The Monetary Policy Committee voted 7-2 again to hold rates, with two members voting for a cut.
"Headline CPI inflation has fallen back to the 2% target," the MPC said. "The restrictive stance of monetary policy is weighing on activity in the real economy, is leading to a looser labor market and is bearing down on inflationary pressures. Key indicators of inflation persistence have continued to moderate, although they remain elevated."
Pound sterling (NYSEARCA:FXB) (GBP:USD) was slightly lower, moving below $1.27 against the greenback.
Michael Brown, strategist at Pepperstone FX said it was "noteworthy that the decision not to cut was described as 'finely balanced' for some members of the Committee, heightening the chances of a cut next time around."
Underlying inflationary pressure, "coupled with earnings growth continuing to run close to 6% YoY, and today's decision falling just 2 weeks before the country heads to the polls in the 'snap' general election, makes the Old Lady's choice to stand pat on policy a logical one, even if the MPC note that politics are 'not relevant' to this month's decision," Brown said.
"Nevertheless, the next move in Bank Rate remains likely to be a cut, probably at the next meeting in August, as the MPC continues to 'keep under review' how long to maintain the current level of restriction," he added. "Such a cut, however, hinges on the disinflation process continuing, and the June CPI figures not bringing any nasty surprises. That said, such a cut is unlikely to be a unanimous decision, with the MPC's hawks likely still concerned about intense earnings pressures, and sticky services prices."
"These concerns should, more broadly, see the pace of policy normalization after the first cut remain relatively gradual, with just one further 25bp cut, probably in November, the base case for the remainder of 2024."