Bank voted 7-2 to hold rates

The Bank of England's monetary policy committee voted 7-2 in favour of leaving interest rates steady at 5.75% earlier this month, minutes released today showed, but two members argued for an immediate cut.

David "Danny" Blanchflower, who has long argued that rates are too high, was joined by deputy governor Sir John Gieve in voting to reduce rates by 25 basis points to 5.5%.

The vote was in line with what City economists had expected but few had expected Gieve to be the one to side with Blanchflower, rather than the other deputy governor, Rachel Lomax.

The Bank's quarterly inflation report released last week hinted that rates would have to come down by 50 or 75 basis points over the next year or so but most of the MPC wish to see more concrete evidence that the economy is slowing before they act.

That sentiment was apparent again in today's minutes. The majority on the MPC thought there was time to wait and see how the economy developed and were still worried about upside inflation risks posed by rising oil and other commodity prices.

"Moreover, since a reduction in Bank Rate was not widely expected this month, there was a danger that an immediate cut would be misinterpreted, precipitating an unwarranted further fall in the market yield curve," the minutes said.

Analysts thought Gieve may have been persuaded that rates needed to be cut because of his responsibility for financial stability. And the minutes did agree that the current.....continued below

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woes in credit markets were a problem.

"With the continuing turmoil in financial markets and the consequent tightening of credit conditions, the balance of risks to growth was to the downside," the minutes said, summarising part of the doves' case.

"There are some analysts predicting a December move, but we suspect that the BoE will want firmer evidence that the economy is slowing. Moreover, with inflation being pushed higher by food and energy costs - possibly back up to 2.5% in the next couple of months- the uncertainty factor might keep the committee on hold for a couple of months," said James Knightley, analyst at ING Financial Markets.

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