Bank rate-setters did not even discuss cut

The prospect of a cut in interest rates next month receded yesterday when minutes of October's meeting of the Bank of England's monetary policy committee revealed that the decision to leave rates at 4.5% was unanimous and the possibility of a cut was not even discussed.

The minutes, released yesterday, show all nine MPC members voted to leave rates unchanged for the second month running as fears of the effect of high oil prices on inflation appeared to take precedence over the problems of weak manufacturing and faltering consumer spending.

Hopes of a rate cut were further dashed in a speech by Richard Lambert, an MPC member, in Belfast yesterday. Mr Lambert showed little support for a rate cut next month and echoed the comments of the governor, Mervyn King, last week that it was not the central bank's job to fine-tune the economy. Mr Lambert's words will come as a blow to employers and manufacturers seeking a cut as he was one of the five MPC members who voted for the rate cut in August over opposition from the other four.

The news that not one rate-setter had argued for cutting the cost of borrowing surprised economists. Many analysts believe that while a rate cut next month now seems unlikely, weak growth may force the Bank to repeat August's quarter-point cut over the next few months. But Vicky Redwood, at Capital Economics, pointed out that the committee had gone from voting unanimously to leave interest rates on hold one month to changing them the next in July and August last year. The minutes revealed the committee's belief that while the short-term prospects for growth and inflation were little changed since the Bank's inflation report in August, the impact of oil on inflation left no room for complacency. Higher oil prices could have a knock-on effect on wage deals and inflation expectations. The MPC said: "If such effects were to take hold, the committee would need to run a tighter monetary policy than would otherwise have been the case." It said it would have more time to assess the outlook when it prepared its next forecasts in November.

The news, coming on the 18th anniversary of the global stock market crash, sent the FTSE 100 index to its lowest level since early July as dealers scaled back expectations for rate cuts. "You've got to remember: it's the 18th anniversary of the 1987 crash, so it's a bit emotional out there," said one trader.