The central bank of the United Kingdom left its Base Rate steady at 0.5 percent, as widely expected, with Monetary Policy Committee member Ian McCafferty for the fifth consecutive time since August voting to raise the rate by 25 basis points to avoid inflation from exceeding the target.
The Bank of England (BOE), which has kept its base rate at the current level since March 2009, said the 40 percent drop in oil prices "means that the increase in inflation is now expected to be slightly more gradual in the near term than forecast in the Committee's November Inflation Report projections."
In November the BOE forecast that inflation would slightly exceed its 2.0 percent target in two years and then rise further, reflecting modest excess demand.
The BOE today repeated its view from November that the risk to this projection was "a little to the downside," reflecting global factors.
Since November, the BOE said international economic activity had been broadly as expected, with the recent volatility in financial markets underlining the downside risks to global growth.
While the recent fall in oil prices will depress global inflation, the BOE added that this would in time provide a support to consumer spending in the UK and other trading partners.
UK inflation was only 0.1 percent in November, up from minus 0.1 percent in the two preceding months.
The BOE also acknowledged that the near-term outlook for economic activity in the U.K. was "slightly weaker" than it forecast in November and the growth in pay "remains restrained and appears to have dipped slightly in the most recent data."
Last month the UK revised down its third quarter Gross Domestic Product growth to 0.4 percent from an initial estimate of 0.5 percent and second quarter GDP to 0.5 percent from 0.7 percent.
On an annual basis, GDP expanded by 2.1 percent in the third quarter, down from 2.3 percent in the second quarter and 2.5 percent in the first quarter.
After appreciating from April through August last year, the pound has been slipping in recent months as investors dial back their expectations for a BOE rate hike in the wake of the U.S. Federal Reserve's hike in December.
Pound sterling was trading at 0.69 to the U.S. dollar today, down from 0.64 at the start of 2015.
The Bank of England issued the following statement: