Bank of England keeps rates at 5.25% in 'finely balanced' decision; traders lift bets for August cut

LONDON — The Bank of England on Thursday opted to keep interest rates steady at its June meeting, but described the decision as "finely balanced" after U.K. inflation hit its 2% target.

Money market pricing lifted the prospect of an August rate cut to nearly 50-50 on what investors perceived as subtly dovish messaging.

The central bank's key rate is at a 16-year high of 5.25%, where it has stood since August.

Seven members of the Monetary Policy Committee voted to hold, while two favored to cut by 25 basis points. The result mirrored the vote in the May meeting. A basis point equals one-hundredth of a percentage point.

In a statement, the MPC noted inflation had reached the central bank's target and said indicators of "short-term inflation expectations" and wage growth had eased.

It was "very difficult to gauge the evolution of labour market activity" because of uncertainty around estimates from the Office for National Statistics, the MPC added.

In a repeat of previous messaging that some analysts had thought it may drop, the Bank of England again said monetary policy needs to "remain restrictive for sufficiently long to return inflation to the 2% target sustainably."

Inflation data on Wednesday showed headline price rises cooled to 2% in May, hitting the target ahead of the U.S. and the euro zone, despite the U.K. suffering a sharper spike in inflation over the last two years.

However, economists said the U.K.'s continued high rates of services and core inflation suggest the potential for ongoing upward pressure.

The central bank's decision to hold comes just two weeks out from a general election in which the state of the economy and proposals for rebooting sluggish growth have emerged as key battlegrounds.

Despite speculation