LONDON (Reuters) - The Bank of England held interest rates at a record-low 0.5 percent on Thursday despite a surge in inflation, ceding the limelight to the European Central Bank, which was expected to raise borrowing costs less than an hour later.
A majority of BoE policy makers continue to judge the economic recovery too shaky to withstand higher rates, betting that inflation of 4.4 percent -- more than double the target -- will ease once oil and food prices come down.
Meanwhile the ECB, dealing with a much smaller inflation problem, has left little doubt that a first post-crisis rate hike was on the cards on Thursday.
All but one of 67 economists polled by Reuters had expected the BoE to leave its key rate at 0.5 percent on Thursday, where it has been since March 2009.
The Bank of England’s rate-setting Monetary Policy Committee said last month that a rise in oil prices, fanned by tension in the Middle East and North Africa, had increased risks to both inflation and growth.
So far there is little evidence that Britain’s economy has enjoyed a strong rebound from the shock contraction at the end of 2010, which economists believe is needed to convince BoE head Mervyn King and the majority on the MPC that it is time to hike rates.