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mpc: 10 on prices, and on the other hand the more-rapid-than-expected pick up in output growth and the extent to which domestic demand growth would slow without further monetary policy tightening. Members' analysis of the immediate policy choice varied according to how they viewed those factors. 37 A variety of arguments were identified in favour of an immediate increase in interest rates. Activity had recovered faster than expected, and confidence indicators had remained strong despite the September tightening of monetary policy and sterling's recent strength. A further decline in the velocity of circulation was needed for narrow money, household Divisia and household M4 growth to be consistent with the inflation target. Final domestic demand growth was projected to slow but still to be above trend at the forecast horizon, supported amongst other things by a strong housing market. A significant negative contribution to GDP growth from net trade was effectively being relied upon to avoid aggregate demand exceeding the economy's supply capacity. The labour market seemed again to be tightening, and there was consequently a risk that unit labour cost growth would not in fact moderate. AEI earnings growth had risen over recent months, and the Bank's regional Agents had reported greater concerns about skill shortages increasing wage growth. Although there was particular uncertainty about the relationship between output growth and inflation, members were influenced by the rise in wage pressures and the pick up in survey-based measures of pricing intentions. Input price pressures were gathering. The inflation projection was still rising at the forecast horizon so that, assuming no news in the meantime, the February projection for 2002 Q1 would be higher than the target. While RPIX inflation was likely to be contained for a while by the various downward pressures on prices, a further tightening of policy was needed to restrain the medium-term inflationary implications of continued strong domestic demand. The risks from tightening and not tightening were not symmetric. An immediate 25 basis point increase would not carry many risks to output as growth was above trend and the level of activity was already probably not much, if at all, below the trend level. But there would be risks in not increasing interest rates now. The news on activity had been significantly stronger than expected since the Committee tightened pre-emptively in September, so that not tightening again risked increasing inflation expectations, entailing a larger tightening later than would otherwise have been necessary. 38 As well as weighing the considerations set out in paragraph 37, those members of the Committee who favoured a higher central projection than that assumed - whether because of different preferred assumptions on the path of the exchange rate or price-cost margins, or on both - regarded the risks of overshooting the target as correspondingly greater. The choice for them now was between 25 and 50 basis points. While a case could be made for 50 basis points in order to counter the strength of