LONDON, Aug 4 (Reuters) - Sterling fell, lifting British stocks, on Thursday after the Bank of England raised interest rates by the most in 27 years, but warned that a long recession is on its way with inflation seeing toping 13%.
The pound fell 0.2% to $1.2122 , having traded 0.3% higher at $1.2184 just before the BoE decision.
The BoE warned that Britain was facing a recession as it rose its benchmark rate by 50 basis points (bps) to 1.75% in an attempt to curb inflation.
Sterling fell 0.5% against the euro to 84.12 pence.
The UK's blue chips FTSE 100 share price index initially dipped following the BoE's decision but quickly recovered as the pound weakened. It was up 0.5% at its highest in around two months.
UK bank stocks eased from highs and were little changed on the day, while a UK-domestically focused index cut some earlier gains and was last up 0.6% on the day.
British gilt yields were down 5 basis points on the day at 1.867% . They had stood at 1.91% before the decision.
Euro zone bond yields extended their falls with Germany's 10-year yield down 3 bps at 0.84% .
Reporting by the London Markets Team, writing by Joice Alves, editing by Dhara Ranasinghe
Source: Reuters