Bank of England committee member voted for rate cut

A member of a key Bank of England committee voted for a reduction in the cost of borrowing for the second month in a row, it emerged today.

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% this month.

He was outgunned by the other eight MPC members, who all voted to leave rates on hold amid stronger signs on the state of the economy.

The 8-1 decision led the Bank to leave rates on hold at 4.5% for the fifth consecutive time earlier this month.

Any new split on the committee would have increased the chances of a cut in rates as early as next month.

Minutes from the January meeting of the MPC showed Mr Nickell argued economic growth had been below trend for some time.

He believed projections made in the Bank’s November inflation report on investment and trade appeared too optimistic, and that it seemed likely inflation would fall below target once the effects of higher energy prices had dropped out of calculations.

But the rest of the committee argued growth in the UK was broadly in line with the November report’s central projection.

Although business investment and exports had been weaker than expected., the members highlighted stronger-than-predicted signals from the services sector, consumption growth and the housing market.

The report said: “Taking this evidence together suggested that growth was likely to continue broadly in line with its historic average rate in the next few quarters.”

Members also said inflation would be broadly in line with targets over the medium term. They said inflation expectations appeared to be “well anchored”, with few signs of wage pressures related to higher oil prices.

The Bank’s next quarterly inflation report is due in February, and will be key in determining a future direction of interest rates.

Many analysts have pencilled in a cut during the next few months due to slower economic growth and the possibility of inflation failing to reach its target.