Ben Broadbent, the Bank's deputy governor for monetary policy, told a committee of MPs that fund suspensions should not be banned and would be the right course of action to take to prevent asset fire sales.
He was giving evidence to the Treasury select committee of MPs as part of a reappointment hearing just over a week after Mr Woodford - once hailed as the country's top stockpicker - banned withdrawals from his flagship Woodford Equity Income Fund after growing numbers of investors demanded their cash.
The fund said it had taken the action to protect savers from "disadvantageous" prices that a fire sale would have created.
It also allowed time for a reduction in the fund's exposure to struggling and unquoted stocks.
The rare intervention has prompted the MPs' committee to announce an inquiry into oversight and demand that investor fees are waived.
Mr Broadbent said: "To be clear, suspensions are allowed.
"Fundamentally, if you have got a fund whose assets are less liquid than their liabilities, there will be episodes when that's probably the right thing to do.
"I don't think we should see this as an adherent problem or something we should get rid of."
He added there could be a wider UK financial stability risk if funds were forced to sell off investments quickly at values below their market price.
"That's precisely what suspensions are designed to prevent," he added.
On the specific question of the Woodford fund suspension, he said: "There are no rules broken, so far as I understand it."
The Financial Conduct Authority (FCA) is facing questions relating to its oversight of the market and it has said it will look again at the fund's investments.
Its chief executive Andrew Bailey has also joined calls for Mr Woodford to waive management fees - reported to be up to £100,000 per day - for the suspended fund.