OREANDA-NEWS. March 19, 2015. Bank of England policymakers see a risk that sterling could strengthen further and leave inflation below target for longer, minutes from their March meeting showed on Wednesday.

The minutes of the BoE Monetary Policy Committee's March 4-5 meeting showed all nine members thought the very weak short-term outlook for inflation warranted keeping interest rates on hold at a record low 0.5 percent.

Like last month, two members described their decision as "finely balanced", but there was no repeat of another member's view that a cut in interest rates in the immediate future could be on the cards.

Overall, policymakers saw little change to the economic outlook since the BoE published comprehensive forecasts in February.

The minutes showed policymakers thought there was a risk in the near term that diverging monetary policy trends and stronger British economic growth prospects relative to the euro zone would put upward pressure on sterling.

"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 minutes said.

While the pound has weakened against the dollar recently, against the euro it has risen to its highest level since the start of the financial crisis.

People the Bank had spoken to in financial markets said upward pressure on sterling might have been stronger still had it not been for uncertainty about the outcome of May 7's closely-fought national election.

However, the Bank said there was little evidence that businesses were delaying investment due to election-related uncertainty.

The moves in sterling come against the backdrop of the European Central Bank launching a 1 trillion euro bond purchase stimulus programme, and the U.S. Federal Reserve is moving closer to raising interest rates.

Explicit comments from the BoE about the outlook for the exchange rate are rare, although Governor Mark Carney warned last week that the impact of rising sterling on inflation could last for some time.

All MPC members agreed it was more likely than not BoE interest rates would rise over the next three years.

Labour costs had grown slightly ahead of forecasts, although a further sustained increase would be needed to return inflation to the 2 percent target, the minutes showed.

MPC member Martin Weale -- who voted for rate rises last year -- said last week that improving wage growth would build the case for a rate hike.

British consumer price inflation eased in January to 0.3 percent, its lowest level since records began in 1989, and looks set to slow further, lifting voters' disposable incomes as national elections approach this May.

The BoE has focused more on wage growth as it considers when to start raising rates. Data due to be released at the same time of the minutes on Wednesday are expected to show earnings rising faster than inflation for a fifth successive month in January.