Bank of England policymakers unanimously decided to maintain the monetary policy stance at the meeting, but signaled faster rate hikes than the current market expectations over Brexit uncertainties.
Although the impact of Brexit cannot be determined in advance, the Monetary Policy Committee vowed to respond to any material change in the outlook.
Inflation is forecast to stay above the 2 percent target over the coming two years and the bank kept growth projections broadly unchanged, while warning that much will depend on Brexit.
At November's MPC meeting, all policymakers including Governor Mark Carney, voted to keep the key rate unchanged at 0.75 percent. The committee also unanimously decided to maintain the quantitative easing through asset purchases at GBP 435 billion.
Policymakers judged that the current stance of monetary policy remained appropriate.
". were the economy to continue to develop broadly in line with the November Inflation Report projections, an ongoing tightening of monetary policy over the forecast period would be appropriate to return inflation sustainably to the 2 percent target at a conventional horizon," the bank said.
The implications for the appropriate path of monetary policy will depend on the balance of the effects on demand, supply and the exchange rate, the BOE added.
The MPC repeated that the monetary policy response to Brexit, whatever form it takes, will not be automatic and could be in either direction.
The bank also reiterated that any future increases in interest rate are likely to be at a gradual pace and to a limited extent.
The BoE assessed that the economic outlook will depend significantly on the nature of EU withdrawal, in particular the form of new trading arrangements, the smoothness of the transition to them and the responses of households, businesses and financial markets.
According to the latest quarterly Inflation Report, released Thursday, the outlook for growth over the forecast period was little changed. The economy is forecast to expand 1.3 percent this year and 1.7 percent in 2019.
CPI inflation was projected to be above the target for most of the forecast period, before reaching 2 percent by the end.
Further, policymakers viewed that business investment has been more subdued than previously anticipated, as the effect of Brexit uncertainty has intensified.
The BoE cautioned that an abrupt and disorderly withdrawal from EU could result in delays at borders, disruptions to supply chains, and more rapid and costly shifts in patterns of production, severely impairing the productive capacity of UK businesses.
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