The bank of England's Monetary Policy Committee (MPC) voted unanimously to keep interest rates at a record low of 0.5% and to maintain its quantitative easing package at £200bn earlier this month, minutes of its meeting revealed yesterday.
The committee, which is primarily responsible for maintaining inflation at the Government's 2% target, will meet again in the first week of February.
At the meeting, it may consider lifting interest rates after data released on Tuesday showed that the Consumer Price Index (CPI) had jumped to 2.9% in December, up from 1.9% a month earlier.
The minutes also reveal that the MPC noted a number of indicators that suggest that the worst of the recession is over.
GDP figures to be published next Tuesday are widely expected to confirm that the economy returned to growth in the fourth quarter of last year.
“Overall, the data were consistent with the view that the UK economy had begun to expand again, albeit weakly,” the minutes noted. “But the strength and durability of any recovery would depend on the interplay of the significant tailwinds and headwinds affecting activity.”
A lack of bank lending was highlighted as a cause of soft economic growth.
The minutes echo comments made by the Bank's Governor, Mervyn King, on Tuesday evening, when he said that he expected inflation to nudge above 3%.
“It was increasingly probable that CPI inflation would rise to well above the 2% target in the early part of 2010 and remain elevated for several months,” the MPC said.
Despite higher than expected inflation, economists argued that the MPC is likely to keep interest rates at 0.5% next month.
Howard Archer, the chief UK and European economist at IHS Global Insight, said: “The minutes of the January MPC meeting indicate that the committee was very much in a holding state ahead of what will be a critical meeting in February.
“”We interpret Mervyn King's comments on Tuesday to indicate that he is currently in no hurry to tighten policy.”