Eight out of the nine members of the Bank of England's Monetary Policy Committee voted to keep interest rates steady at 4.75 per cent in February, with one member voting for a quarter point rate rise.
While that dissent was a surprise, minutes to the MPC's February 9-10th meeting today revealed that for most members the risks to the central forecasts were sufficiently to the downside to justify leaving rates on hold.
"The Committee's best collective judgement was that, overall, risks to the central projections for both GDP growth and CPI inflation were somewhat on the downside. But different members gave different weights to some of the underlying risks."
Some said an eventual rise in rates may be warranted in due course if the economy followed the central projection while one member argued that risks remained skewed to the downside, but less so than in November and a hike was justified.
That one member also argued that the economy had recovered from a soft patch and that equity, credit and housing markets had been stronger than expected.
"Finally compared with November, recent CPI outturns suggested that inflation was not stuck materially below target."
The minutes were taken by financial markets, which were expecting another month of unanimity on the MPC, as a signal that the next move in rates could be up. The MPC has voted unanimously since May 2004.
"The general tone seems to be quite surprisingly hawkish," said Ross Walker, UK Economist at RBS Financial Markets. "The fact that we've already got dissent is significant ... We still prefer an August rate hike to May but I think the risks are shifting."
The pound rallied against the dollar and the euro after the minutes were released while short sterling interest rate futures slipped, although they are already pricing in a greater than 50 per cent chance of a rate hike in the second half of 2005.
The MPC noted that a change in the repo rate at the February meeting would have surprised market participants but one member argued that such a move could be explained in the context of the latest Inflation Report forecasts, published last week.
Those forecasts showed inflation moving to the 2 per cent target next year and then moving above, which already suggested to many that rates would probably rise again later this year.