During the post-policy announcement press conference, Governor Mark Carney said that he expected real wages to fall this year.
Presenting a sober assessment of the economic outlook just weeks before the general election on 8 June, the Bank left interest rates on hold at their record low of 0.25% but hinted that they may need to rise sooner than investors were anticipating if inflation continued to overshoot its target.
The small downgrade comes after a first quarter in which slower consumption put a brake on growth, with a weak 0.3 per cent quarterly expansion that surprised many economists.
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In his regular update on the economy Mr Carney said all of the Bank's forecasts were based on a "smooth" Brexit and have not considered the impact of Britain crashing out without deal.
"We would have had to do an alternative forecast with some variant of a disorderly negotiating process, and we have not done that", he said. It means there will be an agreement as to future trading arrangements and there will be a transition or an implementation period to that new agreement'.More news: Kattappa Romancing Sivagami In This Video Will Surprise Baahubali Fans
It said inflation would hit just under 3% in the fourth quarter, far outstripping wage rises, which will see households rein in spending.
"The factors now weighing on wage growth are unlikely to persist, and it [the MPC] projects that wages will rise significantly as the output gap narrows throughout the forecast period and closes by the end", he said. This followed German Chancellor Angela Merkel reportedly convincing Trump in March that a trade deal with the European Union would be far more advantageous for the United States than one with a post-Brexit UK.
Meanwhile, the Financial Times has reported the minutes from the latest Bank of England Monetary Policy Committee meeting are likely to show an increase in the number of members voting for a rate hike.
Calum Bennie of Scottish Friendly said: "It's positive news for homeowners but cash savers must feel there's no end in sight for the dire returns they're getting".
Still, there remains a chance that one other policymaker will vote for higher interest rates - possibly former Citi economist Michael Saunders, who hinted at this last month.
On growth, the Bank highlighted recent signs that the slowdown since the start of the year had been concentrated in consumer-facing sectors, partly reflecting the weak pound, which fell to three-decade lows in the wake of the Brexit vote. Other members were more cautious, with concerns over slower consumer spending and other trends.More news: Chicken nugget plea sets twitter record
But its quarterly inflation report signalled this year would be the worst for the income squeeze, predicting that real wages would begin to pick up over the next three years, while the pound's recent rebound would limit the surge in inflation.
The most recent figures show that workers are already worse off-real wages are declining, as the 2.3 percent inflation rate is outpacing wages growth, now running at just 1.9 percent compared to February of previous year.
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However, for the first time in at least three years, the Bank also predicted that at 2.8% this year, inflation was set to outpace earnings growth, which will be only 2%.
Outgoing rate-setter Kristin Forbes is likely to repeat her call for a hike to 0.5% after breaking rank in March on fears over surging inflation, which marked the first split decision since last July.More news: Philip's step back means others will step up