In its recent meeting, the Monetary Policy Committee (MPC) of the UK’s Central Bank decided to keep the bank rate at 0.5% with a two thirds majority vote.

Based on the minutes, the near future forecast for inflation was higher than in the November Inflation Report and current inflation is to be somewhere between 4% and 5% for next few months. However, inflation is expected to fall back after the economy’s reaction to various factors declines, and should stay at 2% for most of 2011.

The MPC reached its policy decision with regards to the UK's inflation using its most recent inflation projections. These are backed by the fact that the expansionary monetary policy together with the growth in global demand and the past diminution of sterling should ensure the recovery in the United Kingdom will be maintained.

Despite inflation being taken care of, the impact on growth is highly uncertain as there are downsides associated with the expansionary policy as well. The issue brought forward was the uncertainty of the impact of the fiscal consolidation and restrictions on the availability of credit that may be a reason for consumption to grow much slower than real disposable income.

As for Sterling, the simple observation of the near half percent gain against other major currencies in just ten minutes of the release of the February minutes suggests a rather good kick off for it. However it may not be an aggressive upward trend due to the current weak growth.

To conclude, although it was a majority's vote to accept the Governor's proposal to maintain the interest rate, the committee members are looking to push it up. A few members that opposed a hike now are said to consider an increase if the economy shows signs of picking up after an unexpected fall in output.