The central bank's Monetary Policy Committee voted 6-3 to hold interest rates steady, with the minority voting to raise rates by 25bps.
While inflation has fallen sharply from its peak of 11.1% in October 2022, it still sits at over twice the BoE's 2% target, at 4.6%. The MPC said key indicators of UK inflation persistence "remain elevated" and is expected to remain near to its current rate "around the turn of the year".
"In particular, services price inflation is projected to increase temporarily in January, related to base effects from unusually weak price movements at the start of this year, before starting to fall back gradually thereafter," it explained.
Bank of England sets out 'near-final' plans to tighten capital rules for UK banks
The central bank did reduce its inflation expectations for the rest of 2024, due in part to recent declines in energy prices.
The BoE forecasted modal inflation will remain above its 2% target until the end of 2025, where it will then fall below target. However, the MPC noted that inflation predictions were skewed to the upside, meaning mean inflation projections for the end of 2025 sat at 2.2%.
Despite expectations that inflation will remain high for the next two years, the poor economic performance of the UK is also weighing on the MPC's mind, following data yesterday revealing UK GDP had fallen by 0.3% in October, leaving Q3 growth flat.
"Based on the latest official and survey data, Bank staff expect GDP growth to be broadly flat in Q4 and over coming quarters," the committee said.
It added that fiscal measures introduced in last month's Autumn Statement were estimated to increase GDP by about 0.25% over the coming years.
In its monetary policy summary, the committee solidified expectations put in place by BoE officials that rates would remain 'higher for longer', stating monetary policy will likely need to be restrictive "for an extended period of time".
CBI forecasts no Bank of England rate cuts until at least 2026
"Further tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures," it added.
Lindsay James, investment strategist at Quilter Investors, noted that unlike the Federal Reserve's decision yesterday, the BoE "stopped short of committing to a switch in stance towards rate cuts just yet".
She added: "Investors have been pricing in several reductions throughout next year, but the Bank has today doubled down on its ‘higher for longer' narrative.
"Two years on from its first rate hike of this cycle, however, it is clear the Bank's efforts are starting to take real effect and calls for cuts will only grow stronger should the economy continue to weaken."