British inflation looks on course to return to close to its 2% target by April or May next year, about a year earlier than previously expected, Bank of England Governor Andrew Bailey said on Thursday after the central bank cut interest rates to 3.

The Bank of England cut interest rates on Thursday after a narrow vote by policymakers, but it signalled that the already gradual pace of lowering borrowing costs might slow further.

Following the release of the figures, the pound fell 0.6 per cent against the dollar to $1.334 as traders ratcheted up their bets on BoE rate cuts.