The Bank of England (BoE) met for its first monetary policy meeting of the year on Thursday and voted 8-1 to hold rates at a record low of 0.5 percent, in line with expectations.
It also left its £375 billion ($540 billion) asset purchase program, designed to stimulate lending and growth, untouched. However, sterling rose after the decision with the dissenting voice at the central bank failing to fall in line with the rest of the policy making committee.
"Ian McCafferty preferred to increase bank rate by 25 basis points, given his view that the path of domestic costs was more likely to lead to inflation exceeding the target in the medium term than was embodied in the committee's collective November projections, the statement read.
Sterling saw a boost on the news and rose to session highs of 1.442 against the dollar from lows of 1.436.
In the statement, the bank noted that inflation would take longer to rise to target levels and highlighted that wage growth remained slow in the U.K. "Despite continued reductions in the rate of unemployment, pay growth remains restrained and appears to have dipped slightly in the most recent data," it said.
It also said that the 40 percent decline in oil prices meant 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.