The BoE's rate-setters voted 8-1 to keep borrowing costs at their 16-year high of 5.25% on Thursday as the two officials who had previously called for higher rates changed their stance.
Most economists polled by Reuters had expected one member of the Monetary Policy Committee to continue voting for an increase in Bank Rate.
MARKET REACTION:
FOREX: The pound fell against the euro and the dollar. It was last down 0.35% at $1.2743 versus $1.2749 earlier.
BONDS: British government bond yields extended their falls, with rate-sensitive two-year yields down 11 bps at 4.11% compared to 4.14% just before the BoE statement.
Interest-rate futures showed traders are pricing a 76% chance the BoE will cut rates in June.
STOCKS: UK stocks rallied, with the blue-chip FTSE 100 hitting an intra-day high just after the BoE decision.
COMMENTS:
SUSANNAH STREETER, HEAD OF MONEY AND MARKETS, HARGREAVES LANSDOWN, LONDON:
"The Bank of England has adopted the same stance as the Fed yesterday and the ECB ... indicating that inflation is following the right path, but it's still wary about the potential for prices to bubble up again.
"Input costs are continuing to climb due to wage pressures and higher shipping fees, so companies are pushing up prices. So, it's not surprising that caution remains the name of the game for the Bank.
"Continued stubbornness in wage growth could tip a decision by the Bank of England towards August instead (of June), when a fuller monetary policy report is published."
PHILIP SHAW, CHIEF ECONOMIST, INVESTEC, LONDON:
"The decision to hold rates itself and the arguments which committee members are putting forward are no surprise.
"If the shift in the dynamics on the committees is representative of the MPC (Monetary Policy Committee) as a whole, then we maintain our current view that the Bank of England will begin to cut rates in June."
(Reporting by EMEA Markets Team; Editing by Amanda Cooper and Dhara Ranasinghe)
