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mpc: 6 The sterling effective exchange rate index (ERI) had fallen by nearly 2% since the February Inflation Report and by just over 1% since the March MPC meeting: sterling had depreciated against both the euro and the dollar. It was possible that the prospect of further rises in official interest rates in the United States and the euro area, compared with market expectations of a flat interest rate curve in the United Kingdom, had made sterling less attractive for short-term capital flows. Looking over a longer period, the trend in the ERI since early 2004 had been gently downwards and broadly consistent with interest differentials.