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.

Inflation readings prompted BOE watchers and economists from Bank of America to forward their rate hike expectations to the 0.1% record low for early next year. Bank of America’s economists think the central bank can be pressured to increase its rates as quickly as February, if there is persistent inflation.

Sterling The central bank’s decision to raise the rate was immediately followed by a 0.4% increase in prices at $1.3676, which pared losses 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. This was the sixth consecutive month that Covid-19 restrictions were lifted. However, the growth was much lower than anticipated and slower than the previous month which experienced a 1 % increase.

The ONS stated that the U.K.’s economy was still 2.1% below pre-Covid Pandemic levels.

Andrew Bailey, the BOE Governor, stated that Britain is seeing “some leveling-off” in its economic recovery following the coronavirus epidemic.

Bailey reiterated his belief that the recent spike in inflation will not be sustained, speaking to legislators earlier this month. In August, The BOE stated that inflation could rise to 4%, twice its target, and then fall to near 2%.

Data compiled last week by the ONS shows that the U.K.’s consumer prices index rose by 3.2% during the 12-month period to August. A Reuters poll for August predicted a reading at 2.9%.

On an annual basis, the index rose 2.0% to July.