The pound fell today to approach four-month lows against the dollar after the Bank of England held rates steady as expected but cut its growth and inflation projections for this year and next. 

Before the decision, sterling was up as much as 0.4% at $1.3618. 

But afterwards it fell to trade 0.2% lower on the day at $1.3521, not far above a four-month low of $1.3485 hit on Tuesday. 

It also weakened against the euro, with the single currency rising 0.3% to 0.877 pence. 

"I think the fact you have, as expected, downgrades to growth forecasts and more importantly perhaps, downgrades to the inflation story for 2019 and 2020 period has...been an influence on sterling," said Sarah Hewin, chief economist for Europe at Standard Chartered. 

Sterling has tumbled in recent weeks from its post-Brexit vote highs of close to $1.44 to $1.35, erasing its gains against the dollar for the year as investors unwound bets on a rate increase and British economic data came in worse than expected. 

Bank of England Governor Mark Carney said the bank's earlier guidance on tighter policy had been conditioned on February inflation projections but the economy had not fulfilled those conditions. 

He said the bank wanted to see a growth pick-up in coming months before raising borrowing costs. 

Commenting on today's developments, Garret Grogan, Global Head of Trading, Bank of Ireland Global Markets said the pound lost ground after the Bank of England's decision, with the market latching on to the revision lower of the long-term inflation forecasts. 

He noted the euro-sterling rate traded back above 88p, as the market priced out the likelihood of a rate hike this year. 

"Debate by market participants centres on when the next rate hike will be. Some agree with Governor Carney that the Q1 softness is temporary, pointing to the record employment levels and relatively elevated inflation levels; others are more cautious and see signs of a slowing UK economy," Mr Grogan said.

He added that he believes caution on sterling is still warranted.