UK interest rates will remain at 4.75% after the Bank of England voted to curb borrowing costs.
However, the Bank seriously considered an interest rate cut in December as it predicted that the UK economy would fail to grow later this year.
While the bank voted to keep rates unchanged, three members of the nine-member rate-setting committee wanted to cut it to 4.5 percent.
The split opens the door to a rate cut as early as February when the bank next meets.
Details of this month’s meeting showed the bank believed the economy had stalled between October and December.
Commenting on the decision, Bank Governor Andrew Bailey said: “We believe that a gradual approach to future interest rate cuts is appropriate but given the growing uncertainty in the economy we are not committed to that. When and how much we will reduce the rate in the coming years.
Dave Ramsden, one of the bank’s deputy governors, was among those pointing to “slow demand” and a “weakening labor market”.
While recent data showed both inflation and wage growth were high, the economy is struggling. In November, the bank had forecast growth of 0.3% but now expects 0%.
It also lowered its expectations for the July-September period.
The revision will be a blow to Labor, which has made boosting economic growth its top priority.
It promises to deliver the most sustainable economic growth in the G7 group of rich nations.
In minutes of the meeting, the bank said there was “uncertainty about how the measures announced in the autumn budget are impacting growth”.
In the Budget, Chancellor Rachel Reeves announced £40bn worth of tax rises, most of which will come from increased National Insurance contributions from employers.
By the time the bank makes its next decision in February, it will have more data on the impact of the budget changes as well as the incoming US administration’s trade tariff policies.