LONDON, May 11 (Reuters) - Sterling fell half a percent to a one-week low against the dollar on Thursday after the Bank of England’s inflation report showed interest rates were unlikely to rise within the next two years while only one policymaker voted for a rise this month.
While the Bank said that it may need to raise interest rates before the late 2019 date it said was indicated by market pricing, that timeline was nine months later than that in its February forecasts.
The BoE’s Monetary Policy Committee (MPC) also voted 7-1 in favour of keeping interest rates on hold at their record low 0.25 percent this month, quashing some bets in markets that a second official could flip to support a rise.
Sterling, earlier trading at $1.2920, fell to $1.2872 after the decision.
It also hit a day’s low of 84.43 pence per euro, down from 84.13 pence earlier and half a percent lower on the day.
“(There had been) some thinking in the market for a 6-2. This is disappointing for the bulls, no question,” said Mizuho’s head of hedge fund FX sales in London, Neil Jones.
Britain’s FTSE gained slightly, taking it into positive territory, last up 0.1 percent. The mid-cap index was unchanged. (Reporting by Ritvik Carvalho and Helen Reid)