Sterling rallied yesterday as the Bank of England shrugged off fears of a triple-dip recession and held fire on pumping billions extra into the UK's flatlining recovery.
The pound, down 7 per cent against the dollar this year, jumped nearly a cent in the immediate aftermath of the Monetary Policy Committee's decision.
The vote is likely to have been a nail-biter after three members called for another £25bn in quantitative easing last month. The no-change call leaves QE at £375bn. Interest rates, held again yesterday at 0.5 per cent, have been lodged at their present record low since March 2009.
Nida Ali, the economic adviser to the Ernst & Young Item Club, said the decision was "a little surprising" following dovish comments from MPC members, although factors such as a stronger February for the UK's dominant services sector may have swayed the committee.
Ms Ali said: "There is a real sense of 'if not now, then when?' The MPC are sending mixed signals which are adding to the sense of uncertainty. We would be strongly in favour of looser monetary policy and had been encouraged by the MPC's recent comments and by signs that they were starting to think outside the box. But talk is cheap and it is time that they delivered."
Despite a buoyant start to the year for stock markets on both sides of the Atlantic – and inflation well above the Bank's 2 per cent target at 2.7 per cent – the economy has been in reverse for four of the past five quarters.