* BoE Feb forecasts seen crucial for policy outlook
* BoE still expects inflation to fall below target
* Fiscal tightening will affect BoE's monetary decisions
(Adds reaction, detail)
By Matt Falloon and Christina Fincher
LONDON, Jan 20 (Reuters) - The Bank of England's Monetary Policy Committee voted unanimously to keep policy unchanged earlier this month, saying February's inflation forecasts would give a better idea of the economic outlook.
The MPC, a politically-independent body, also made clear that Britain's large budget deficit needed to be reduced and said the pace and extent of fiscal tightening, as it became clearer, would affect their decisions.
Minutes to the Jan. 6-7 meeting, published on Wednesday showed all nine members of the MPC wanted to keep interest rates at a record low of 0.5 percent and to maintain its 200 billion pound ($326.5 billion) asset-buying scheme.
There was no sign of any dissent, with policymakers saying recent developments had not substantially changed their medium term view.
The minutes reinforced expectations that February will be a crucial juncture for policy.
Most analysts expect the BoE to halt its asset-buying programme once its 200 billion pound target has been met in the next few weeks but are split over when monetary policy might be tightened. The BoE appears to be keeping all options open.
"While quantitative easing looks unlikely to be extended next month, any tightening of policy is still some way off," said Vicky Redwood, a UK economist at Capital Economics.
"The MPC is still content to look through any near-term rise in inflation and focus on the longer term effects of the large amount of spare capacity."
The MPC admitted the current spike in inflation looked like being higher than previously thought but still expected inflation to fall below its 2 percent target because of the fragile state of the economy following an 18-month recession.
Data on Tuesday showed consumer price inflation leapt more than expected to 2.9 percent in December. It is expected to rise further early this year.
The MPC said the economy appeared to be growing again, albeit weakly. Policymakers said large policy stimuli and a weaker sterling exchange rate were still the main supports for growth, but noted powerful headwinds remained.
"It was clear that a significant fiscal consolidation was needed in the United Kingdom, the precise nature and pace of which remained unclear, and to which monetary policy would need to respond as new information became available," the minutes said.
That message echoed a call from BoE Governor Mervyn King who used his first speech of the year on Tuesday to warn that markets can be unforgiving of fiscal policy uncertainty, which also made it harder to set monetary policy. [ID:nLAG006050]
For the economy, King predicted "a long period of healing ahead". (Editing by Mike Peacock)