BoE MPC concerned by tightening monetary conditions and sterling’s appreciation

Minutes of the MPC's March meeting revealed that the decision of the Committee to leave policy unchanged was again unanimous. 

The line from the February minutes that one member thinks the next change in the stance of monetary policy was roughly as likely to be a loosening as a tightening was dropped this month.

The major difference between this month's MPC minutes and the February minutes is that this month the Committee was worried about a tightening of UK monetary conditions and, in particular, the recent appreciation of sterling against the euro. 

The minutes said: 

"There was a risk that divergent monetary policy trends, as well as stronger prospects for growth in the United Kingdom than in the euro area, might continue to put upward pressure on the sterling exchange rate. This had the potential to prolong the period for which CPI inflation would remain below the target and exacerbate the risk that lower expectations of inflation might become more persistent." 

"The combination of the increase in the price of oil and appreciation of sterling that had occurred over the month was expected to leave the path of inflation broadly unchanged in the near term, but a little lower further ahead [emphasis added]."

UniCredit notes ....

• The MPC reiterated that it would seek to return inflation to the 2% target within two years. It suggests the Committee is now putting more weight on a more gradual tightening path for the Bank Rate than it did in February. 
  
  
• But, as before, the minutes said different members placed different weights on the risks to the inflation outlook.