The Bank of England Thursday kept its key, short-term interest rate the same, at 5%, the bank announced. Economists surveyed by Bloomberg News had expected the BOE to maintain current interest rate levels.

In its previous meeting, the BOE kept its benchmark interest the same, as well. The BOE's last rate cut occurred on 10 April 2008, when it lowered its key rate by 25 basis points to 5.0%.

In contrast, the U.S. Federal Reserve has lowered its key, short-term interest rate by 325 basis points, to 2% from 5.25%, as it attempts to jump-start a U.S. economy dragged down by its worst housing slump in a generation. At its most recent meeting, the Fed took a pause in its rate cut cycle, with Fed Chairman Ben Bernanke recently signaling his concern about rising inflation and the decline in the U.S. dollar.

Meanwhile, the European Central Bank has shifted from an accommodative to a restrictive monetary policy: last week the ECB increased its key rate, the refinance rate, by a quarter point, to 4.25%.

BOE's decision: no surprise

London-based economist Mark Chandler told BloggingStocks Thursday he wasn't surprised by the BOE's stand-pat decision. "There is concern about rising inflation here in the U.K., but the signs of economic slowdown are all around us, also, not the least of which being declining housing prices," Chandler said. "Housing prices in June dropped the most in that month in about 15 years. The U.K. also isn't affected as much by high oil prices as the U.S. and [continental] Europe are, so that gives the Bank of England some leeway. And if GDP continues to slow, the bias will be toward lowering rates, not raising them."

The currency markets drove the dollar higher and the pound lower Thursday after BOE's decisions. The dollar strengthened about one cent to $1.9733 versus the British pound and about one-half cent to $1.5692 versus the euro.

Further, Chandler said the BOE's stand pat policy may have the de facto effect of easing inflation pressure, if the dollar continues to rise versus the euro and the pound. "There's general agreement now that the dollar's fall these past four years has boosted commodity prices by about 30-40%, so if the BOE's stance pushes the dollar higher, it will ease inflation pressures some," Chandler said. "But the key is getting the dollar to trend higher, long-term, and stay higher."

Monetary Policy Analysis: A prudent move by the Bank of England -- namely, no move. Unlike the European Central Bank, the BOE has the economic slowdown front-and-center, given the U.K.'s larger vulnerability to a housing sector recession. Moreover, as economist Chandler noted, the dollar could begin to trend higher, long-term, versus the British pound, if the markets sense higher interest rates are ahead in the U.S. -- something that would take some of the steam out of dollar decline-related commodity price gains.