Bank of England holds fire as inflation weighs

Bank Of England Building

The Bank of England (BoE) left its benchmark interest rate unchanged Thursday - as expected - as the prolonged risk of stubbornly low inflation pushes back expectations of an interest rate rise, with a hike in 2015 now looking less likely.

The U.K. central bank's nine-member Monetary Policy Committee (MPC) left the bank's main interest rate at a record low of 0.5 percent and the total size of its bond portfolio at £375 billion ($571 billion) after their February policy meeting.

The decision comes after official figures last month showed that inflation in the U.K. fell to its lowest level since May 2000 in December, and is likely to fall even further, according to BoE Governor Mark Carney.

Read More UK inflation plummets to 14-year low in December

The annual rate of consumer price inflation halved to 0.5 percent in December year-on-year, from 1.0 percent in November.

Minutes of the rate-setting MPC's January meeting showed that Martin Weale and Ian McCafferty, the committee's two hawks, joined others in voting for no change in rates due to higher risk of prolonged low inflation. Prior to December's meeting, Weale and McCafferty had voted for an increase in rates every month from August.

"While Governor Carney has recently warned that interest rates might go up sooner than are currently expected, there is absolutely no chance that this will come today, and probably not for the remainder of this year," said Robert Kuenzel, director of euro area economic research at Daiwa Capital Markets.

Read More BoE's Carney slams euro zone austerity

Meanwhile, data from the British Retail Consortium (BRC) and Nielsen released Wednesday showed that the U.K. is now battling the deepest level of food deflation on record.

"For twenty-one consecutive months, prices in Britain's shops have fallen, this month by -1.3 percent," BRC Director General, Helen Dickinson, said. "It's the second time in three months that we've seen food prices fall, accelerating to their lowest levels on record."

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