In the same way that the decisions to lower interest rates during the course of 2003 were determined by the outlook for inflation rather than the actual inflation at the time, so the recent decisions of the Monetary Policy Committee to keep rates unchanged were based on forward-looking assessments of the factors that affect the inflation rate, and were informed by the forecasting model of the Bank.
It should be stressed however that although the forecast is an important guide to policy, policy is not determined by the forecast in a mechanical way. Although the current inflation rate was well within target at the time of the December meeting, the focus of the MPC was on the future trend of inflation.