The Bank of England has voted unanimously to keep the UK’s main interest rate at a record low of 0.25%.
It said 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 $1.25.
The Bank also voted to make no changes to its bond buying programme, 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.”
Analysis: Kamal Ahmed, BBC economics editor
There may well have been a small sigh of relief emanating from the Treasury at midday today as the Monetary Policy Committee published its decision on interest rates.
The Bank still expects inflation to rise above its 2% target, but possibly not as quickly and by not as much as it expected last month.
That is important for the government which has said that it wants to oversee an economy that works for everyone.
For many, that means an increase in real incomes which have remained in largely stagnant waters since 2008.
Yesterday, the Office for National Statistics said that wage growth had strengthened slightly to 2.5%.
If, at the same time, inflation risk reduces, then millions of voters might, finally, begin to feel a little wealthier.
Which, as far as the Treasury and the broader government are concerned, is good news.
Uncertainty
Former 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,” Mr Sentance said.
The decision comes a day after the US Federal Reserve raised its key interest rate by 0.25% to 0.75%, citing stronger economic growth and rising employment.
The Bank noted that UK’s economy continued to grow at a moderate pace, but warned there was potential trouble down the line.
“Forward-looking components of business surveys are weaker than those regarding current output … suggesting that some slowing in activity is in prospect during 2017. The timing and extent of this slowing will depend crucially on the evolution of wages and how resilient household spending is to the pressure on real incomes from higher inflation.”
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