Hope for future cut in UK interest rate

Hopes of a cut in interest rates early next year were ignited today after it emerged that a member of the Bank of England pressed for a reduction this month.

Stephen Nickell broke ranks with colleagues on the Monetary Policy Committee (MPC) to vote in favour of a quarter-point cut in interest rates to 4.25%.

But his argument that inflation was likely to miss the Bank’s 2% target in the medium term because of factors including subdued wage growth and trade were not shared by the other eight MPC members.

Minutes from the December meeting of the MPC show that the majority of members thought it was too soon to be confident that the cost of crude oil had peaked or about the direction of gas prices over the coming month.

The report said: “It was also too early to conclude that there would be no wage response to the past pick-up in inflation.”

The 8-1 decision is the first time that there has been any dissent on the MPC over rates since the Bank voted to lower borrowing costs to 4.5% in August – the first downward move for two years.