The Bank of England kept its key policy rates unchanged Thursday and lifted growth forecasts for this year and next amid surprisingly resilient economic data from Europe's third-largest economy.
The decision, as well as comments from the Bank that it would only have a "limited tolerance" to over-shooting inflation and that its next rate decision could go either way, added further fuel to the surging pound, which extended its single-day advance to 1.2485. the most since August.
"In the three months since (the Bank's August meeting), indicators of activity and business sentiment have recovered from their lows immediately following the referendum and the preliminary estimate of GDP growth in Q3 was above expectations," the BoE said. "These data suggest that the near-term outlook for activity is stronger than expected three months ago."
The key Bank Rate was left unchanged at 0.25%, the lowest in the Bank's 300 year history, and maintains the pace of its £435 billion ($542 billion) quantitative easing program. The statement indicated that the decision was unanimous among the nine members of its Monetary Policy Committee.
The Bank also issued fresh inflation forecasts that see consumer prices accelerating by 2.7% next year (from a prior forecast of 2%) and only returning to its 2% target in 2020.
The Bank also said U.K. GDP would grow 2.2% this year (up from a previous forecast of 2%) and revised its 2017 estimate to 1.4% from 0.8%. However, it trimmed projections to 2018 and 2019 to 1.5% and 1.6% respectively.
Earlier Thursday, a closely watched gauge of the U.K. services sector, which comprises more than three-quarters of the country's economic activity, unexpectedly surged in October, though evidence of mounting price pressures will complicate the Bank of England's mission to keep the economy on a stable course.