The Bank of England has kept interest rates unchanged, wrong-footing many investors who expected the first cut in more than seven years to cushion the impact of last month's vote to leave the European Union. But, as David Pollard reports, the Bank also gave a strong signal that monetary easing will come in August.
In the end, it wasn't to happen - at least not now. Policy easing from the Bank of England was seen as so likely that world shares hit an eight-month high before the decision. On hopes it would trigger a global round of monetary easing and government stimulus. Instead, Governor Mark Carney flummoxed expectations for the first cut in seven years. (SOUNDBITE) (English) BGC PARTNERS MARKET STRATEGIST, MIKE INGRAM, SAYING: "It is clearly a surprise decision or even non-decision .... I actually think it is a good decision. .... Sterling is not in crisis - it has been trading quite steadily for some time now and I think crucially the gilt market is looking fairly stable ... There isn't a problem to be fixed at this particular point in time." But: prepare for monetary easing next month. The minutes of this meeting making that intention explicit. There are signs, the minutes say, that post-referendum economic activity is likely to weaken - even if the data still needs to confirm that. In the meantime, all eyes on the UK's new finance minister - and his hints that government purse strings may be loosened. (SOUNDBITE) (English) TOM STEVENSON, INVESTMENT DIRECTOR, FIDELITY INTERNATIONAL, SAYING: "The onus actually needs to fall on the other side of the equation: fiscal easing. So tax policy from the government probably now needs to come into play now to support the Bank of England's monetary policy." If markets were on a monetary policy high before the announcement, they soon eased back. Sterling rallied strongly. As for the date of a policy move: August 4th seen as certain - the day the Bank of England issues its next key inflation report.