The Bank of England (BoE) has left interest rates at 0.5% and made no change to its £375bn quantitative easing programme, despite economic pressures in the wake of the UK's shock decision to leave the European Union last month.
Despite markets widely expecting the Monetary Policy Committee (MPC) to cut rates by 25 basis points to 0.25% this month, the committee voted by a majority of 8-1 to hold.
However, the bank said most members of the committee expect monetary policy to be loosened in August.
It said: "Markets have functioned well, and the improved resilience of the core of the UK financial system and the flexibility of the regulatory framework have allowed the impact of the referendum result to be dampened rather than amplified.
"The committee discussed various easing options and combinations thereof. The exact extent of any additional stimulus measures will be based on the committee's updated forecast, and their composition will take account of any interactions with the financial system.
"Against that backdrop, at its meeting ending on 13 July, the majority of MPC members judged it appropriate to leave the stance of monetary policy unchanged at present."
Earlier today, the FTSE 100 was up as much as 0.8% in anticipation of a rate cut, but following the announcement it fell into negative territory.
Meanwhile, the sterling leapt by 0.65% to $1.3232 against the dollar following the announcement.
Many felt a cut to interest rates this month would ease the current strains on the UK economy.
Bank of England governor Mark Carney previously said he would "not hesitate" to take additional measures to stimulate the economy and also hinted at a summer rate cut.
With the pound starting this week at a near 31-year low against the dollar, Carney has been under continuing pressure to review rates.
Prior to the cut, the BBC estimated that financial markets had already priced in a 75% chance of interest rates being cut from 0.5% to 0.25%, with rates not expected to return to 0.5% in the next five years.
Figures from the services sector and the construction industry have pointed to a sharp slowdown, with the latter recording its worst month in seven years in June.
Prior to the shock Brexit vote, the central bank was widely expected to follow the US Federal Reserve in hiking rates this year.
Equity rally
Laith Khalaf, senior analyst at Hargreaves Lansdown, said widespread cynicism around a recent rally in UK equities, particularly within the FTSE 100, comes down to a belief it is being driven by cheap money from the central bank, rather than genuine economic progress.
"Likewise the property market has been supported by low-cost mortgages, boosting house prices, and relegating a generation of younger people to living in rented accommodation," he said.
"Remarkable as it seems, things may soon start to look even bleaker for cash savers. Any further small cut in interest rates is not going to have a material impact on their income, but if a weaker pound leads to higher inflation, cash on deposit will start going seriously backwards in terms of buying power."
Fidelity International bond manager Ian Spreadbury warned it would be the wrong decision to cut interest rates, as it will encourage people to borrow when global debt to GDP is already at an all-time high.
He added the Bank was trying too hard and, rather than manipulating the system with quantitative easing to avert a recession, it might be better to allow the country to fall into recession.
"I think a better option would be to use the fiscal side more. It is a tough spot and, ultimately, it may be that we have to go into recession. That is the way the capital system works, you have good times and you have bad times. It seems like trying to avoid a recession at all costs is not the right thing to do."
'Additional measures'
Carney has previously indicated that he does not expect to introduce negative interest rates in the UK, as the Bank of Japan did in a shock move earlier this year.
However, he has suggested that rates could be brought down to 0% in order to restart the UK's quantitative easing programme, which saw it create £375bn of new money between 2009 and 2012.
The last interest rate rise was on 5 July 2007, from 5.5% to 5.75%, making it increasingly likely that the UK will endure a decade without a rate rise.
On the day following the referendum, Carney said the Bank of England would "assess economic conditions and will consider any additional policy responses".
He said the bank had put in place "extensive contingency plans" to support the UK economy following its decision to leave the European Union.
In a speech, he said the bank has taken "all the necessary steps to prepare for today's events", referring to the UK's vote to leave the EU.
As well as standing ready to provide more than £250bn of additional funds through its normal facilities, Carney said the bank is able to provide "substantial liquidity" in foreign currency.
Earlier this month, Carney reduced the UK countercyclical capital buffer rate from 0.5% to 0%, in order to free up £150bn for banks to lend as the UK entered what he described as "a period of heightened uncertainty" following the Brexit vote.
