Bank of England Laves Rates Unchanged

LONDON (AP) -- The Bank of England has opted to keep interest rates at a record low 0.25 percent after the economy showed unexpected resilience following the vote to leave the European Union.

The announcement Thursday from the bank's Monetary Policy Committee was widely expected following recent figures showing that Britain's economy grew by a forecast-busting quarterly rate of 0.5 percent in the July-September period.

Growth was stronger than many economists had anticipated. Analysts feared growth would slow after the June 23 vote to leave the EU, a decision which spurred the bank to cut rates and expand its economic stimulus program in August.

Economists have warned the real test will come in March, when Prime Minister Theresa May plans to formally notify the EU of Britain's intention to leave. That will trigger at least two years of negotiations which will highlight threats to the economy, the biggest of which is the possible loss of tariff-free access to a market of 500 million people.

Investor concern is already hitting the pound, which has lost almost a fifth of its value since the vote.

The British pound has surged after the ruling that the government can't trigger the Article 50 process for Brexit without Parliament's involvement.

Minutes after the decision, the pound was up 1.1 percent at $1.2430 as traders reacted to the news.

The pound has taken a battering, losing about a fifth of its value against the dollar, since the June 23 vote to leave the EU.

Many in the markets hope that the court ruling will at the least delay the process of Britain's exit from the EU or diminish the government's ability to push through a so-called "hard Brexit," which would see Britain leave the European single market. The hope is that lawmakers won't give their backing if the government intends to push for that sort of deal.

In spite of that rise, there are concerns that the pound's slide will lead to much-higher inflation. Though a lower pound makes British exports more competitive in international markets, it has the potential to stoke inflation by raising the cost of imports, such as oil and food, more expensive.

In its quarterly economic forecasts that accompanied the rate decision, the Bank of England forecast that inflation would rise to 2.7 percent next year, which is way higher than the current 1 percent rate and above the central bank's target of 2 percent.

The bank also said growth would moderate next year from 2.2 percent this year to 1.4 percent.

Simon Kirby, head of macroeconomic modeling and forecasting at National Institute of Economic and Social Research, said "the depreciation of sterling has been the most striking feature of the post-referendum economic landscape."

"This will pass through into consumer prices over the coming months and quarters," he said.

Analysts have suggested the bank would accept above-target inflation and start raising rates only gradually --- perhaps not even until 2019.