In its quarterly Inflation Report, the Bank forecast the economy would slow in 2008 and inflation would accelerate.
However, it added that even if interest rates fell by half a percentage point, it would still hit inflation targets.
Analysts said that this signals that interest rates should dip next year from their current level of 5.75%.
Nevertheless, the Bank said that there was a lot of uncertainty over the outlook for the economy.
It noted there were some signs of a softening in house prices, but said that the link between the housing market and consumer spending was a complex one.