The Bank of England edges closer to rising interest rates, but holds steady.

The Bank of England held interest rates at record low levels on Thursday, defying market expectations for a rate increase to tackle rising inflation. But the central bank said inflation would peak at about 5 percent in April, “materially higher” than its previous expectations, and signaled that rate rises were likely to be necessary in the coming months.

If so, it would join other central banks pulling back on emergency levels of monetary stimulus as supply chain disruptions, higher energy prices and labor market shortages push up prices around the world.

The Bank of England is still expected to be the first major central bank to raise rates. On Wednesday, the Federal Reserve said it would begin winding down its enormous bond-buying program this month as prices continue to rise, eventually putting it in a position to raise rates in the middle of next year.

Like other central banks, the Bank of England insists that the current bout of high inflation will be “transitory,” but it’s becoming increasingly unclear how long it will last.

Investors had been primed for an increase of 15 basis points, or 0.15 percentage point, that would have taken interest rates to 0.25 percent from 0.1 percent. At the monetary policy meeting this week, two policymakers voted for such as increase, arguing that there was no sign that the end of the Britain’s furlough program, which had supported wages during pandemic lockdowns, had eased constraints in the labor market — but they were outvoted by the seven other members. Three voted to halt the central bank’s bond-buying program immediately, instead of letting it run until its scheduled end next month.

The central bank is caught between a worsening economic growth outlook and higher prices. It downgraded its forecasts for growth in economic output, predicting a rise of just 1 percent in the fourth quarter, half the amount forecast three months ago, and said higher prices are expected to squeeze household incomes for the next two years.

The economy now isn’t expected to return to its prepandemic levels until the first quarter of next year, a quarter later than previously expected. Echoing Christine Lagarde, the head of the European Central Bank, the British central bank also expects supply chain disruptions to last longer than expected. Bottlenecks will weigh on the global economy until late 2022, the Bank of England said.

On the other hand, Britain’s annual inflation rate was 3.1 percent in September, substantially above the central bank’s 2 percent target, and policymakers expect it will peak around 5 percent next spring. Last month, Andrew Bailey, the central bank’s governor said above-target inflation was concerning and that policymakers would need to ensure it didn’t become permanent.

Throughout the winter prices increases for goods and food are expected to keep inflation high. And the future of wholesale energy prices was “very uncertain,” having already increased for oil by 80 percent and for natural gas by 400 percent since the end of last year, the bank said.

Still, inflation would fall back “materially” in the second half of next year, the central bank predicted.

The central bank said it wanted to wait until there was official data on how the end of the furlough program was affecting the labor market before it made a decision on when to tighten monetary policy. Just over a million jobs were supported by the program when the program ended in September, the bank estimated.

The bank is expecting only a small increase in unemployment in the current quarter, and by the time the central bank meets again in mid-December there will be updated labor market data for October, giving insight into what happened when the government stopped supporting wages up to 80 percent of the hours not worked.

The unemployment rate was at 4.5 percent in the three months through August. By the end of next year, the rate is forecast to be 4 percent.

“Provided the incoming data, particularly on the labor market, were broadly in line with the central projection in” this month’s monetary policy report, the central bank said, “it would be necessary over coming months to increase Bank Rate” to return inflation to its 2 percent target.

The Bank of England highlighted that markets were implying interest rates would climb to around 1 percent by the end of next year. And if interest rates followed that path, then inflation would fall back below the bank’s target of 2 percent by the end of the central bank’s forecast period in 2024. If interest rates were held at 0.1 percent, inflation would be 2.8 percent in two years time.