The Bank of England signalled yesterday that it was in no hurry to move interest rates in either direction, predicting that inflation would stick close to its two per cent target over the next two years.

Compared with its projections last November, the central bank's latest quarterly inflation report forecast a slightly higher path for the consumer price index over the next year but then broadly similar further out.

Many economists had expected a weaker inflation and growth outlook, and the report pushed the pound up and shot sterling interest rate futures lower as it dented expectations of imminent rate cuts.

But nor did the report do much to support a minority view among analysts that the BoE is poised to raise rates in the coming months.

"The MPC is happy to sit on its hands for an extended period if its central view plays out, but ready to cut if growth does not continue to hold in," said Malcolm Barr, economist at JP Morgan Chase.

Growth was expected to pick up above its historical average in the near-term before easing back in the second year of the forecast period. That was also slightly stronger in the near term than predicted in November but weaker thereafter.

"There are risks to the central views for growth and inflation - both on the upside and the downside - and on these there are some differences of views among Committee members," said BoE Governor Mervyn King at a news conference.

Philip Shaw, chief economist at Investec, said this difference of opinion could encourage another rate cut this year if the BoE's forecast on growth proved to be too optimistic as he suspected.

MPC member Stephen Nickell voted for a rate cut in both December and January and is expected to have done so again earlier this month, possibly joined by fellow MPC member Kate Barker.

The report said key risks included the outlook for consumer spending, the prospect for net exports, the sustainability of low long-term interest rates, the margin of spare capacity and the impact of high energy prices on inflation.