LONDON (Reuters) - Britain's economic recovery is gaining momentum but Bank of England policymakers held different views about the amount of slack in the economy and the medium-term inflation outlook, minutes from their April 9 meeting showed.
The BoE expects the economy grew by 1 percent in the first three months of this year from the fourth quarter of 2013, up slightly from a previous growth forecast of 0.9 percent, the minutes showed.
Economists at the Bank expected a slight slowdown in the April-June period.
Members of the Monetary Policy Committee also thought it was "possible" that a sustainable rise in real wages, consistent with a durable recovery, was on the way.
But the minutes again showed the MPC were unsure on how much scope Britain's economy had to grow without generating inflation.
"There was considerable uncertainty about the amount of slack remaining within the economy and committee members had a range of opinions on this and the outlook for inflation in the medium-term," the minutes showed.
British inflation dropped to 1.6 percent in March from February's 1.7 percent - the lowest level since October 2009.
Before December last year, annual inflation exceeded the central bank's target every month since December 2009, eroding the spending power of households.
But inflation has been falling sharply across Europe in recent months, with euro zone inflation also hitting its lowest in more than four years in March, at 0.5 percent.
BoE policymakers also cast doubt on whether the headline unemployment rate was understating the amount of slack in the labor market because many of the jobs added by the economy were self-employed.
"Members of the committee held a range of views about the extent to which self-employment represented a form of labor market slack," the minutes showed.
Britain's unemployment rate unexpectedly dropped in the three months to February below the 7 percent level originally set by the BoE for considering an increase in interest rates, and wages caught up with inflation for the first time in nearly four years.
Britain's labor market rebounded strongly in 2013, wrong-footing the BoE. It had said last August it would start thinking about raising record-low interest rates when unemployment fell to 7 percent.
As the jobless rate unexpectedly raced towards that level, the Bank updated its guidance in February. It said measures of spare capacity in the economy were the best way to assess its plans for tightening borrowing conditions, once unemployment hit the 7 percent level.
The minutes noted no other differences among the MPC members, who voted unanimously to keep interest rates at a record low 0.5 percent.
Financial markets have pointed to spring 2015 as a potential time for the first rate hike.
Output is still just below its peak in the first quarter of 2008 - a much weaker recovery from the financial crisis than in most other big advanced economies. The BoE is concerned that low productivity may limit Britain's ability to catch up without generating higher inflation in the medium term.
Britain's economy is growing strongly, and in February the BoE upgraded its growth forecast for 2014 to show expansion of 3.4 percent, which would be the country's fastest growth since 2007. Last year the economy grew by 1.7 percent.
Reporting by Andy Bruce and William James, editing by William Schomberg