The Bank of England (BoE) warned monetary policy is likely to need to be restrictive for an extended period of time as it left interest rates unchanged on Thursday.
At its meeting, the Monetary Policy Committee (MPC) voted by a majority of 6–3 to maintain bank rate at 5.25%.
Three members preferred to increase Bank Rate by 0.25 percentage points, to 5.5%.
The BoE has enacted 515 basis points worth of hikes since lifting bank rate from its pandemic-induced low of 0.10% roughly two years ago.
Further tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures, it said.
It continued to judge that the risks to inflation projections were skewed to the upside, such that the mean projection for CPI inflation was 2.2% and 1.9% at the two and three-year horizons.
It expects GDP growth to be broadly flat in the fourth quarter and over the coming quarters.
Employment growth is likely to have softened, and there has been further evidence of some loosening in the labour market but there remain upside risks to the outlook for wage growth.
It also cautioned key indicators of UK inflation persistence remain elevated.