The Bank of England's Monetary Policy Committee (MPC) voted unanimously on Thursday to keep interest rates at 0.75% as it warned of an uncertain path ahead for UK rates.
All nine policymakers voted to maintain rates at current levels, noting "the MPC judges at this meeting that the existing stance of monetary policy is appropriate" to achieve its 2% inflation target.
The MPC will not meet until 7 November - after the UK is currently slated to leave the European Union on 31 October.
The MPC's rate decisions "would need to balance the upward pressure on inflation, from the likely fall in sterling and any reduction in supply capacity, with the downward pressure from any reduction in demand."
It said that in the event of a no-deal Brexit, the odds of which have increased since Boris Johnson became prime minister, "the monetary policy response would not be automatic and could be in either direction", the BoE said.
With sterling likely to fall, inflation to rise and GDP growth to slow in this scenario, the MPC's rate decisions "would need to balance the upward pressure on inflation, from the likely fall in sterling and any reduction in supply capacity, with the downward pressure from any reduction in demand".
Hinesh patel, portfolio manager at Quilter Investors agreed, noting this trifecta of events "would place the bank in a tricky position as there could simultaneously be valid arguments in favour of both a rate hike or a cut".
Should a path towards a smooth Brexit materialise and global look to recover, "a significant margin of excess demand is likely to build in the medium term."
They added: "Were that to occur, the committee judges that increases in interest rates, at a gradual pace and to a limited extent, would be appropriate to return inflation sustainably to the 2% target."
Thomas Pugh, UK economist at Capital Economics, thinks "the MPC is unlikely to feel under much pressure to rush ahead with rate hikes", even if there were a Brexit deal at the end of October. "Indeed, we think that the MPC would hold fire until the second half of next year," Pugh said.
"If there is a no-deal, then the MPC would probably quickly change its tune and support the economy by cutting interest rates."
Patel added that markets are pricing in a 23% chance of a cut before the year ends and less than 50% chance at any time in the next 12 months, "meaning the market still believes that a cut probably won't happen in the next year".
"That seems fairly optimistic given that, in addition to domestic pressures in the UK, we are also in a highly unpredictable global economic and political period. Continued fractions in the ongoing global trade disputes between the US and its trading partners, the current threats to global oil production and the prospect of an escalating economic slowdown may put pressure on the UK domestic economy, as it will in many regions. It means that there are lots of contradictory signals making it difficult to predict the next steps for the BoE."
The MPC also pointed to an intensifying US-China trade war and a continued weakening of global growth alongside Brexit uncertainties that have generated "heightened volatility in UK asset prices" and made "UK economic data more volatile".
"The Committee judges that underlying growth has slowed, but remains slightly positive, and that a degree of excess supply appears to have opened up within companies.
"Brexit uncertainties have continued to weigh on business investment, although consumption growth has remained resilient, supported by continued growth in real household income. The weaker global backdrop is weighing on exports.
"The government has announced a significant increase in departmental spending for 2020-21, which could raise GDP by around 0.4% over the MPC's forecast period, all else equal."
This article was first published by Investment Week, a sister title to International Investment.