The Committee reviewed monetary and economic developments since its previous meeting. The outlook for world economic activity has strengthened. Prospective growth in domestic demand remains strong: increases in wealth, labour income and household borrowing all suggest that consumer spending will continue to grow robustly. Inflation is currently below the 2½% target and is expected to remain so for a while, but it is likely to rise above target further ahead, reflecting developing pressures in the labour market and on productive capacity. Accordingly the Committee concluded that an increase in interest rates of 0.25% to 5.75% was needed to meet the inflation target in the medium term.