LONDON — The Bank of England on Thursday kept monetary policy unchanged and downgraded economic growth projections for the third quarter of the year.

It comes shortly after the U.K.’s economic growth slowed unexpectedly in July and consumer price inflation saw its largest month-on-month increase since records began in Jan. 1997.

The inflation reading prompted some BOE watchers to bring forward rate hike expectations off the record 0.1% low to early next year, while economists at Bank of America believe the central bank could be pressured into a rate rise as soon as February if inflation pressure persists.

Sterling traded up 0.4% at $1.3676 shortly after the central bank’s rate decision, paring losses from earlier in the week.

The U.K. economy expanded by just 0.1% in July from a month earlier, according to data from the Office of National Statistics. It was the sixth consecutive month of growth amid the removal of Covid-19 restrictions, but the increase was significantly lower than expected and much slower than the previous month, which saw a 1% rise.

The ONS said the U.K. economy remains 2.1% below its pre-Covid pandemic level.

The figures prompted BOE Governor Andrew Bailey to suggest Britain was seeing “some leveling off” of the economic recovery from the coronavirus pandemic.

Speaking to lawmakers earlier this month, Bailey reaffirmed his view that a recent jump in inflation would not prove to be persistent. The BOE warned in August that inflation could hit 4% this year, double its target level, before falling back to close to 2%.

The U.K.’s consumer prices index surged by 3.2% in the 12 months to August, according to data compiled by the ONS last week. A Reuters poll had predicted a reading of 2.9% for August.

The index jumped 2.0% in July on an annual basis.