LONDON—The Bank of England, in a surprise change of course, played down the chances of a further cut in interest rates soon, saying it expected the U.K.’s decision to leave the European Union to weigh less heavily on the economy in the next year or so than previously thought.

Central-bank officials also warned there were limits to how far they would tolerate price growth in excess of their 2% target, signaling that they might be prepared to raise borrowing costs if the pound’s steep decline fuels a more rapid acceleration in inflation.

The central bank’s change of stance underscores the uncertainty facing the U.K. as it heads toward Brexit, which is expected to take place in 2019 after two years of negotiations on terms of Britain’s withdrawal and future relationship with the EU.

“We have a neutral bias around policy going forward,” said BOE Gov. Mark Carney, adding that he could envision scenarios in which the key interest rate could be raised or lowered.

Like many forecasters, the BOE appears to have been wrong-footed by the initial strength of the economy since the June referendum. But central-bank officials—as well as many economists—still harbor grave concerns over the possible toll an EU exit may have on the U.K. economy longer term.

At its November policy meeting, officials on the BOE’s nine-member Monetary Policy Committee voted unanimously to keep the BOE’s benchmark interest rate at 0.25% and to press ahead with a £70 billion ($86 billion) program of asset purchases announced in August.

The pound rose to a high of $1.248 after the BOE’s announcement, although the currency also gained on the news that a U.K. court ruled the government needs Parliament’s consent to set the U.K.’s formal exit in motion.

A fresh set of quarterly forecasts published by the central bank show that officials expect the economy to expand more strongly in 2016 and 2017 than they predicted in the summer, although they expect growth to tail off sharply in 2018 and 2019. They have penciled in growth of 2.2% this year and 1.4% in 2017, compared with earlier forecasts of 2% and 0.8%, respectively.

They also anticipate higher inflation, a consequence of a battered pound. They now expect annual inflation to reach 2.7% by the end of next year, well in excess of their 2% target. Officials noted that sterling’s slide accelerated further in October, after Prime Minister Theresa May signaled her willingness to sacrifice some economic closeness to the EU in favor of tighter control of immigration.

“There are limits to which above-target inflation can be tolerated,” the committee said, according to minutes of the meeting.

The BOE dropped guidance issued in August that another rate cut was likely this year, saying instead that “monetary policy can respond, in either direction, to changes in the economic outlook as they unfold.”

The BOE’s shift comes amid continued uncertainty over the U.K.’s future economic ties to the EU. Mrs. May has said she plans to give Brussels formal notice of the U.K.’s withdrawal from the EU before the end of March, a move that will start the clock ticking on at least two years of exit negotiations.

But that plan suffered a blow Thursday, when a U.K. court ruled Thursday that the government couldn’t kick off the process of leaving the European Union without a vote from Parliament.

In a news conference following the BOE’s decision, Mr. Carney said the court’s decision was “an example of the uncertainty that will characterize this process.” But he added: “We can deal with it.”

The shift also comes after Mr. Carney ended fevered speculation about his future by saying Monday that he intends to stay in post an extra year, to mid-2019, to see the U.K. through the anticipated end of divorce talks. He declined to answer questions Thursday about his willingness to extend his stay further if the Brexit talks hadn’t yet been completed.

“We’ve had enough of that saga,” he said.