LONDON — The Bank of England on Thursday ended its last meeting of the year with a decision to leave interest rates unchanged, after UK inflation rose to an eight-year high. months.

Analysts had widely expected a rate hold at the December meeting, as policymakers remain concerned hard services inflation and wage growth.

The BOE has already taken its key rate from 5.25% to 4.75% this year in two quarter percentage point moves.

In deviation from expectations, three members of the Monetary Policy Committee voted to cut rates, while six were in favor of keeping them. Economists polled by Reuters had predicted only one member would vote to cut.

Sterling pared gains against the US dollar directly after the BOE announcement, trading 0.25% higher at 12:40 pm The greenback organize a broad rally on Wednesday after the US Federal Reserve cut interest rates by a quarter of a point but signaled a more hawkish outlook for 2025. He gave up some gains on Thursday morning.

In a statement, the BOE said that the rise in UK headline inflation in November to 2.6% was slightly higher than previously expected, adding that services inflation remained "high."

The BOE staff also lowered their economic forecast for the fourth quarter of 2024, now predicting no growth, compared to the 0.3% expansion predicted in its November report.

UK growth figures have come in weaker than expected in recent months, with the economy putting a surprise contraction of 0.1%. in October.

Money markets this week reduced bets on the pace of further trims next year following the publication of data on inflation and summer wage growth, and they are now pricing in roughly 50 basis points of the coming cut, down from expectations of about 70 basis points. worth cuts on Monday.

"The split vote decision and the dovish tone of the minutes suggest that a February interest rate cut remains very much in play, if a deal is not yet done," said Suren Thiru, director of economics at the Institute of Chartered Accountants in England and Wales. in email comments.

"The Bank of England risks backing itself into a corner on the pace of policy easing because, with inflation likely to wander higher, the timing of rate cuts of interest in the future may become increasingly complex, especially if fears of stagflation come true."

Matthew Ryan, head of market strategy at Ebury, said BOE officials appeared "more divided than ever" on the path forward for rates, with doves focusing on the fragile economy United Kingdom, while the hawks favored a gradual approach due to the recent increase in inflation. The last UK budget and the threat of increasing trade tensions under US President Donald Trump next year will also be seen as inflationary risks, said Ryan.

UK borrowing costs were higher after Thursday's announcement, with yields on 10-year government bonds up 4 basis points at 4.596%. Gilt yields were in focus this week, as the UK's risk premium over Germany's hit its highest level since 1990. German bond yields also rose on Thursday, with the yield on 10-year bunds — the eurozone benchmark — jumping 5 basis points.

The European Central Bank last week cut rates by a quarter of a point in the fourth such move of the year, a sign of firm intent to enact further monetary easing in 2025.