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mpc: 11 the target. Given that inflation was set to remain below target in the relatively short term, there was time to gather more evidence, in particular about the path of the exchange rate, earnings, price-cost margins, and productivity, all of which were highly uncertain but important to the inflation outlook. There was, thus, no need to take the risk that an immediate 50 basis point increase might put further upward pressure on sterling. An immediate rise of 25 basis points was the best course. 40 For some other members, the immediate choice was between a 25 basis point increase and no change, and for them that choice was very finely balanced. On the one hand, there were risks to the inflation outlook from continued buoyant domestic demand growth and a tight labour market, which implied strong underlying domestically-generated inflation. On the other hand, inflation could remain below target for a protracted period if sterling's strength persisted, as the experience of the past few years suggested it clearly might. While inflation would tend to be higher than expected if sterling fell by more than assumed in the best collective projection, it was arguable that there could be time to raise rates if and when that happened as inflation was otherwise set to remain below target for a further period. Given the immediate benign outlook and the major uncertainties about the more distant prospect, this analysis suggested that either a rise of 25 basis points or no change would be consistent with pursuit of the inflation target and thus with the Committee's remit. However, given the Committee's inflation projection profile, in the view of some there was a risk that leaving rates unchanged would have the perverse effect of putting further upwards pressure on sterling, by leaving the market with the expectation that tighter policy had simply been deferred; and in the view of others, that sterling could not fall much on a no-change decision without engendering expectations of further interest rate rises. Although sterling was substantially overvalued against the euro, it was not clear how monetary policy could in the short run help to produce a better balance between external and internal monetary conditions. In those circumstances, the better course was to continue to restrain domestic demand growth, which remained above trend and so posed an upside risk to the medium-term outlook for inflation unless brought back to a more sustainable rate. On a delicate balance, the better course was therefore to raise rates by 25 basis points. Some members taking this view thought that, subject to any new evidence about the inflation outlook, there might then be an opportunity to wait and see before making any further change, and that this would offer the best chance of achieving the inflation target while enabling sterling to return to a more realistic level. 41 On another view, there was no need for a further increase in the repo rate. Internationally, the tightening of monetary policy elsewhere over the past month would help to contain any inflationary pressures from the stronger world economy. Domestically, there had been little news, and recent labour