The pound retreated from early highs against its most major counterparts in the European session on Thursday, after the Bank of England raised its key rate by 50 basis points, but predicted a recession in the third quarter of this year.

The nine-member rate-setting committee decided to raise the bank rate by a half percentage point to 2.25 percent from 1.75 percent.

Policymakers reiterated that policy is not on a pre-set path and the committee will, as always, consider and decide the appropriate level of Bank Rate at each meeting.

The monetary policy committee unanimously decided to begin the sale of UK government bonds held in the Asset Purchase Facility shortly after this meeting.

The BoE now forecast UK GDP to decline by 0.1 percent in the third quarter, in contrast to its previous projection of a 0.4 percent growth.

Nonetheless, inflation is forecast to remain above 10 percent over the following few months, before starting to fall back.

The pound pulled back to 1.1271 against the greenback, after rising to 1.1364 around 6:45 am ET. It had dropped to a 37-1/2-year low of 1.1211 at 3 am ET. The pound is likely to challenge support around the 1.11 level.

The pound declined to near a 4-month low of 159.12 against the yen, from a 2-day high of 164.43 seen at 4 am ET. The pound is seen finding support around the 153.00 area.

The pound eased to 0.8753 against the euro, following a 1-week high of 0.8691 set around 6:45 am ET. If the pound falls further, it is likely to test support around the 0.90 region.

In contrast, the pound remained higher at a 9-day high of 1.1149 against the franc, from near a 48-year low of 1.0814 seen around 3:15 am ET. At Wednesday's close, the pair was worth 1.0880.

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