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There is no doubt that the most important factor behind the weakness of GBP over the past two months has been monetary policy. The increase in asset purchases announced in August and the expectation of further easing to come contrasted with other G10 central banks, where the expectation has moved to when they will start tightening policy - or in the RBA's case, how much more tightening will come. GBP-positive forecast since August has been largely based on the view that the market had priced too much easing in for the UK for two reasons: 1) MPC would revise up its forecast for inflation; 2) some people had misinterpreted recent comments on GBP. Today's minutes strengthen the confidence about this.

In particular, on both the key downside worries for the MPC at present the minutes appear to be more positive than expected - these were the extent to which the QE programme is leading to a pick-up in credit and how weak consumption is likely to be given restricted credit and increasing unemployment. On credit, the first paragraph of the "immediate policy decision" section makes clear that the MPC thinks QE is working, largely via asset prices. The minutes also note that "Corporate credit remained hard to access, although there was some evidence that credit conditions had recently eased". On household consumption, the outlook for unemployment is likely to be vital. Again, the minutes are modestly positive on this: "at face value, the resilience of employment relative to output so far in this recession was encouraging for the prospects for household spending".

The final point the minutes make is that: "There were differences of view among members of the Committee on the balance of risks to the medium-term outlook for inflation, and how it had shifted in recent months". Since the August Inflation Report, activity data have continued to improve, both in the UK and the rest of the world, inflation has surprised to the upside - despite the downside surprise in September's CPI reading - and asset prices have been unambiguously positive for GBP. Though clearly it is not a unanimous view on the MPC, it is difficult to see how the news since August has not been largely to the upside for the risks to inflation.

Overall, the minutes are more upbeat than expected. They are consistent with no change of policy in November, and, assuming the global economy continues to recover as economists expect, with a higher probability of policy being tightened in Q1 next year than is currently priced in. They add to view that prospects for GBP are clearly to the upside.