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Economy

Bank of England holds interest rates steady, but vote hints at possible increase in August

Bank of England left interest rates unchanged in a move that money managers think might be signaling there is room for an August rate hike.

The BoE said Thursday its monetary policy committee voted 6-3 to maintain the bank rate at 0.5% and voted unanimously to maintain monthly U.K. government bond purchases at 435 billion ($583 billion) and corporate bond purchases at 10 billion.

"While one or two dissenting voices to raise rates had been anticipated, they were not expected to be three votes for a hike. Interest rate markets were unprepared for this move. Having fully priced a hike in the first half of the year, the combination of weaker economic data and central bank comment had lulled markets into believing tightening was not imminent," said Michael Metcalfe, global head of macro strategy at State Street Global Advisors, in an emailed statement.

Melanie Baker, economist at Royal London Asset Management, said in a separate statement: "The minutes were a touch more hawkish than last month. Although the majority of (monetary policy committee) members aren't in an immediate hurry to raise rates, there was a sense of the door being kept firmly open for a rate rise in August."

In addition, Hemmo Hemmes, head of investment strategy at Cardano, said in a statement: "The Bank of England has retained its bias towards slowly tightening policy, keeping the door open for a higher base rate in August. Ultimately, the central bank is walking a fine line. It has to balance Brexit-induced economic weakness and an economy that is already facing a tight labor market that could over time lead to higher inflation."