Members of the Bank of England's monetary policy committee unanimously voted for a rise in interest rates earlier this month, minutes of their meeting have revealed.

Published on Wednesday, the minutes explained the reasoning behind the decision to raise interest rates by 25 basis points to 4.25 per cent on May 6.

They suggested that inflationary risks over coming months were "broadly balanced".

But despite increased geo-political uncertainties and rising oil prices, the MPC offered an upbeat assessment of continuing strong growth in the UK economy.

"Business indicators were consistent with a buoyant outlook for the corporate sector," said the minutes.

The MPC was also keen to insist that it was not raising interest rates purely to target rising house prices.

Committee members agreed there was continued strength in the housing market, with price rises "significantly higher" than had been envisaged at the time of the February Inflation Report.

Caution was prompted by the fact that "there had been few past instances, either in the United Kingdom or abroad, when house prices had fallen without there having been a prior shock to economic or monetary conditions".

"In presenting a decision to raise the repo rate, it would be important for the committee to make clear that this did not imply that it was targeting house price inflation, or any other asset price," added the minutes.

"The significance of the unexpected acceleration in house prices was that it supported a stronger short-term outlook for consumption and output growth, and hence a steeper projected rise in inflation. It also increased the uncertainties relating to these projections."

The committee also noted there had been a 16 per cent rise in the sterling price of oil since its April meeting.

"Several factors seemed to underlie this rise: the general global upturn in activity; the low level of private inventories in the United States; particularly buoyant demand from China; market speculation that OPEC would raise its target price range; and political events in the Middle East."

These factors suggested higher oil prices "might persist" but the implications for monetary policy of higher oil and commodity prices "depended on whether inflation expectations overall remained well anchored".

"It was possible that geopolitical risks had increased, but it was not clear whether, if any of those risks materialised, higher or lower inflation would result in the medium term," added the minutes.

While there were also discussions about the possibility of a larger half point interest rate rise earlier this month, the committee members eventually voted by nine to nil in favour of the quarter point rise.

Global assessment

The MPC also took into account economic developments in the key trading areas.

"The latest evidence suggested that the recovery in the world economy had continued broadly as envisaged," said the minutes.

"World output and trade had grown strongly in 2003, and the continuing recovery might be contributing to signs of emerging inflationary pressures. World demand weighted to reflect the pattern of UK exports was, as expected, growing somewhat more slowly than aggregate world demand."

In the US, the recovery "remained on track" with falling unemployment and tax rebates helping to underpin consumption.

The picture in the euro area was described as "little changed over the past month", with growth estimated at 0.3 per cent in the final three months of last year.

However, more recent data on the French economy "suggested that the euro-area aggregate might be revised up slightly".

"The key issue for the Committee was to assess whether the euro-area recovery would continue. The latest data, although mixed, suggested that the downside risks had diminished," said the minutes.

And in Asia, economies "continued to grow strongly". China's GDP growth was running at 9.7 per cent but there was a warning that this pace of growth "might not be sustainable".