LONDON: The Bank of England's Monetary Policy Committee remained divided on whether to raise interest rates this month and appeared no closer to tightening policy than they were in February.
Minutes to the BoE's March 9-10 policy meeting, published on Wednesday, suggested the medium-term outlook had not changed, although the risks to inflation and growth had both risen as a result of soaring oil prices.
Sterling fell and UK share prices extended gains after the minutes, which some investors had expected to strike a more hawkish tone.
"It doesn't look as though the MPC is any closer towards deciding to push rates up in the near term," said Philip Shaw, an economist at Investec.
Data on Tuesday showed inflation surged to a 28-month high of 4.4 percent in February, a jump that pushed markets to price in a more than 50 percent chance of a UK rate rise in May.
The central bank said there was a "significant risk" inflation could exceed 5 percent in the coming months. However, it also noted that consumer spending had "deteriorated sharply" and it was too early to tell how strongly the economy was recovering after a surprise contraction at the end of last year.
The BoE said the recent rise in oil prices, fanned by tension in the Middle East and North Africa, had increased adverse risks to both inflation and growth.
"The balance between the upside and downside risks to the medium-term inflation outlook had probably not shifted significantly over the month," policymakers concluded.
BoE chief economist Spencer Dale and external MPC member Martin Weale both voted for a 25 basis point hike -- as they did in February.
Andrew Sentance, who has long been the committee's most hawkish member, maintained his call for a 50 basis point rate rise.
The remaining six members voted to keep rates on hold at 0.5 percent, where they have stood since March 2009, and Adam Posen reiterated his lone call for an additional 50 billion pounds of quantitative easing.
There were differences even among those who voted to keep rates on hold. Some thought the risks from higher inflation expectations remained limited while others thought the risks had risen and the case for a rate rise had strengthened in recent months.
"Overall, the uncertainty created by both developments in the oil market and the recent indicators of household spending and confidence meant that there remained merit in waiting to see how those factors evolved," the minutes said.
In its last quarterly forecasts in February, the BoE's central projection was for inflation to peak at 4.5 percent in the third quarter of 2011, and then take a further 12 months to return to its 2 percent target.
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