Bank of England holds interest rate at record low

The Bank of England on Thursday froze interest rates at a record low 0.25 percent, but three policymakers called for a hike on Brexit-linked fears over soaring consumer prices.

The central bank said in a statement that its monetary policy committee (MPC) voted 5-3 in favour of the status quo, but forecast inflation would surge further above its 2.0-percent target in the coming months.

"Inflation was projected to overshoot the target by more than previously expected and to remain above it throughout the three-year forecast period," the bank said in minutes from its regular policy meeting.

However, it also cautioned that there were "arguments in favour of leaving the policy rate unchanged".

"A slowdown in household consumption and gross domestic product as a whole had recently begun ... although consumer confidence had held up, there had been further signs of a slowing housing market and new car registrations had fallen sharply," the minutes read.

Economic growth slowed to just 0.2 percent in the first three months of 2017 in the run-up to Britain's general election, after 0.7-percent expansion in the final quarter of 2016.

The bank added Thursday that MPC members Ian McCafferty and Michael Saunders joined Kristin Forbes in voting for an increase to 0.50 percent.

The panel also voted to maintain the quantitative easing (QE) stimulus cash pumping around the economy at £435 billion ($555 billion, 494 billion euros).

Inflation soared close to a four-year high in May, official data showed earlier this week, as a Brexit-fuelled slump in the pound pushed up import costs.

The Consumer Price Index inflation rate leapt last month to 2.9 percent, boosted by the rising cost of energy, food and recreational goods.

Inflation had held close to zero throughout 2015 -- but has surged since then on the back of the weak pound following the shock EU exit vote in June 2016.

Sterling took another mauling last week, striking a seven-week dollar low after British Prime Minister Theresa May's Conservatives lost their absolute majority in a shock election result.

- Sterling slide fuels inflation -

"CPI inflation has been pushed above the 2.0-percent target by the impact of last year's sterling depreciation," the BoE added in its statement on Thursday.

It reached 2.9 percent in May, above the MPC's expectation.

"Inflation could rise above 3.0 percent by the autumn and is likely to remain above the target for an extended period as sterling's depreciation continues to feed through into the prices of consumer goods and services," it said.

"In contrast, pay growth has moderated further from already subdued rates," it cautioned.

With wages growth failing to match the rises in inflation, consumers are limiting how much they spend in stores and online.

Retail sales fell by more than expected in May as consumers were hit in the pocket by high inflation, official data showed Thursday.

Sales by volume dropped by 1.2 percent month-on-month in May after jumping by an upwardly-revised 2.5 percent in April, the Office for National Statistics said.

Analysts' consensus forecast had been for a fall of 0.8 percent in May after warm weather had boosted sales the previous month.

On a 12-month basis, retail sales rose 0.9 percent in May compared with the same month in 2016.