However, inflation is "likely to overshoot the target later in 2017 and through 2018".
The Bank of England kept its record low interest rate and unconventional measures unchanged at its meeting on Thursday, as widely expected, in the final session for the year that set the stage for the United Kingdom exit from the European Union.
The Bank halved the base rate in August as part of a mammoth economy-boosting package of measures and said more cuts were on the cards, though it has since rowed back on this as growth has proved better than expected.
The trade-weighted value of sterling has increased by 6 per cent since the Bank's 3 November Inflation Report, in which it forecast that inflation will rise above 2 per cent in 2017.
But the BOE said it still expects inflation to temporarily overshoot its target later next year and through 2018 and fully offsetting this by higher interest rates would result in "undesirable" downward pressure on wages, economic output and higher unemployment.
Some economists say the BoE would probably be following suit were it not for uncertainty around the outcome of the European Union exit talks which are due to start next year.
"A slowdown in growth remained likely, but there had been little news since the time of the November inflation report about domestic activity and, although the near-term global outlook had improved, this was counterbalanced by more elevated risks", the minutes said. Expectations of looser fiscal policy after the election of Donald Trump as U.S. President had pushed up long-term bond yields, the BoE said.
While this week's inflation figure for November stood at 1.2%, the MPC said it expects inflation to rise to its 2% target within six months.
Emphasising its balancing act between managing inflation and growth, the MPC also said the economy will cool in 2017 as consumer spending weakens and the vote to leave the European Union rattles investment plans. In October, inflation dipped to 0.9 percent, requiring BoE Governor Mark Carney to write a letter to finance minister Philip Hammond, which the BoE published on Thursday. "Monetary policy can respond, in either direction". The lower pound is expected to stoke some inflation by raising the cost of imports like food. Sterling is now down about 15 percent against the US dollar and 8 percent against the euro since the June 23 referendum, making suppliers and retailers battle for profits as imported goods become more expensive.
But it warned inflation was still set to race higher in 2017 and 2018 as the weak pound pushes up prices, adding sterling was set for "month-on-month" volatility as the UK's Brexit plans evolve. Carney has repeatedly said the BoE could tolerate some overshoot to its 2 percent inflation target, while warning that there are limits to this.
Twelve-month CPI inflation, now at 1.2%, is expected to hit the 2% target within the next six months, the MPC said, but it warned that real incomes for households could slow and weaken spending while uncertainty caused by Brexit could reduce business activity and slow growth overall next year.