The bank's nine-member Monetary Policy Committee, led by Governor Mervyn King, will lower its key rate a quarter- percentage point Feb. 7, derivatives prices indicate. Policy makers held borrowing costs at 5.5 percent at today's meeting while assessing the effects on the economy of last month's quarter-point reduction.
Against the euro, the pound dropped to 75.18 pence by 2:45 p.m., the lowest since the common European currency's introduction in 1999, from 74.84 pence yesterday.
The U.K. currency rose to as high as $1.9667 after the rate decision and was recently at $1.9611, from $1.9585. It earlier slipped to a 10-month low of $1.9541.
Britain's currency extended declines versus the euro after European Central Bank President Jean-Claude Trichet said today there are ``upside risks'' to euro-region inflation in ``the medium term.'' Trichet spoke during a press conference after the Frankfurt-based bank left its main lending rate at 4 percent.
The difference in yields, or spread, between two- and 10- year gilts notes narrowed 2 basis points to 13 basis points. The so-called flatter yield curve suggests investors have pared their holdings of short-dated securities as they become less pessimistic about the near-term economic outlook.