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Bank of England holds rates as pressure mounts

The Bank of England (BoE) left interest rates at a record low of 0.5 percent and its asset purchase target unchanged at £375 billion ($617 billion) as expected on Thursday.

Yields on benchmark 10-year U.K gilts were relatively unchanged, holding steady at 2.976 percent after starting the session at 2.991 percent. Sterling showed a small spike against the dollar after the news, ticking higher to $1.6466 before falling back down to $1.6455.

(View our live blog: ECBand Bank of England rate decisions)

All 51 economists polled by Reuters this week did not expect any change of monetary policy by the central bank with markets fully anticipating the decision.

However, a growing number of voices expect the Bank of England will be pushed into changing the nuances of its "forward guidance", as the U.K. economy continues to show signs of recovery.

Jason Alden – Pool | Getty Images

Under the new governor Mark Carney, the Bank said last August that it would not consider raising interest rates from their current 0.5 percent until the jobless rate falls to 7 percent, which the bank does not expect to happen before the end of 2016. It currently stands at 7.4 percent after reaching a high of 8.4 percent in 2011. Mark Carney has previously told CNBC that he wouldn't rule out any changes to the unemployment threshold.

(Read More: Should Bank of England abandon forward guidance?)

The consensus, according to a Reuters poll, is for an increase in interest rates in the second half of next year, but before then 13 of 41 economists expect the BoE to drop its 7 percent jobless rate threshold — increasing the pressure on Mark Carney to alter his promises with the improving U.K. economy.

Rob Wood, chief U.K. economist at Berenberg, argued that this would make a mockery of the policy which is meant to provide clarity about interest rates.

"If the threshold can be lowered once, it can be lowered again, or raised for that matter," he told CNBC this week.


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