The Bank of England voted unanimously on Thursday to keep the UK's main interest rate at a record low of 0.25%, and anticipated that the next rate move could be in either direction. The last change was a rate cut in August, in the wake of the UK's vote to leave the EU.
The Bank said it now predicted a slightly lower path for inflation, although it is still expected to overshoot the 2% target next year. The decision sent the pound lower, falling below US$1.25.
The Bank also voted to make no changes to its bond buying program, created to stimulate the UK economy after the referendum. That means it will continue to buy and hold £435bn of UK government bonds and £10bn of corporate debt.
The Bank said it now predicted a slight improvement in the inflation forecast after seeing the value of the pound and the oil price rise since its last meeting.
All else equal, this would result in a slightly lower path for inflation than envisaged in the November Inflation Report, though it is still likely to overshoot the target later in 2017 and through 2018, the Bank said.
It added: The global outlook has become more fragile, with risks in China, the Euro area and some emerging markets, and an increase in policy uncertainty.
Monetary Policy Committee member Andrew Sentance said: The Committee is planning to look through the rise in inflation expected next year and remains concerned about the prospect of slower growth following the Brexit referendum result.
He added that the Bank of England was unlikely to follow the US in raising rates soon. However the picture could change next year if we get further US rate rises and the UK economy remains resilient in the face of Brexit uncertainty,” Sentance said.