The Bank of England has said market expectations of future rate rises are "not warranted", sparking a drop in sterling and a 50 point jump in the FTSE 100.
Holding rates at 0.5% and QE at £375bn in its first meeting since Mark Carney's (pictured) arrival as governor, the Bank also took the unusual step of issuing a statement alongside its decision.
The BoE said "the implied rise in the expected future path of Bank rate was not warranted by the recent developments in the domestic economy".
The change in that implied path, suggesting the UK base rate could rise in late 2014, had been triggered by signals the US Federal Reserve may slow down its own QE programme later this year.
The suggestion that investors had got ahead of themselves pushed the FTSE 100 up by a further 50 points to 6,344. A further rally then saw the index move 2.8% higher on the day to reach 6,400 by mid-afternoon.
Benchmark 10-year gilt yields fell from 2.42% to 2.35% immediately after the statement, according to Tradeweb data, while sterling dropped by more than a cent against the dollar towards the $1.51 mark.
The Bank will provide an assessment of the benefits of providing "forward guidance" to markets when it publishes its next quarterly inflation report in August - though today's statement appears to do just that.
This assessment will also "have an important bearing on the [Monetary Policy Committee's] policy discussions in August", the BoE said today.
Capital Economics' chief UK economist Vicky Redwood said: "The statement makes it even more likely that a more formal form of forward guidance will be introduced next month.
"Our best guess is that the guidance will consist of a commitment to keep interest rates at 0.5% until unemployment has fallen below a certain threshold, although thresholds for nominal GDP or wage growth are also possible."
Today's statement increases the likelihood the MPC will vote for further QE later this year, though the split of today's vote will not be known for a further two weeks.
Former governor Mervyn King was one of three committee members to have voted for more QE in recent months, with the remaining six opposed.
"At its meeting today, the Committee noted that the incoming data over the past couple of months had been broadly consistent with the central outlook for output growth and inflation contained in the May Report," today's statement said.
"The significant upward movement in market interest rates would, however, weigh on that outlook; in the Committee's view, the implied rise in the expected future path of Bank rate was not warranted by the recent developments in the domestic economy."
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