Bank voted 7-2 to keep rates unchanged

Two members of the Bank of England's monetary policy committee again voted for a rise in interest rates earlier this month, it was revealed today.

Minutes of the MPC's April 6 and 7 meeting showed that the deputy governor, Andrew Large, and Paul Tucker, the executive director, voted for the second month in succession to raise rates from 4.75% to 5%.

They argued that, although household spending had slowed faster than the committee had expected, some rebound was likely, and also said the risk of sharp falls in house prices had diminished, reducing downward pressures on the economy.

However, the other members of the nine-member MPC believed too little had changed since the previous month to warrant a change in their votes.

"For these members, although they varied in their assessment of the evidence, the data suggested that the overall risk to the inflation forecast was still to the downside," the minutes said. "For that reason, an increase in the repo rate this month would also be difficult to explain and would surprise financial markets."

At the same time, however, MPC members argued that real incomes, employment and wealth had all been resilient, meaning consumption might pick up after its weakness around the turn of the year.

Today's minutes followed yesterday's surprising jump in inflation. The increase in oil prices to more than $50 (?26) a barrel and the early date of Easter contributed to a rise to 1.9% from 1.6% in the consumer prices index (CPI) in March. The figure was just below the Treasury's 2% target, and was the highest rate of inflation since May 1998.

Yesterday's numbers prompted some analysts to predict that the Bank would raise borrowing costs at its May meeting, which comes just after the general election.

"The subsequent news that consumer price inflation spiked up to 1.9% in March reinforces our view that there will be a 25 basis points rate hike in May," Howard Archer, the chief UK economist with the consultancy Global Insight, said.

Mr Archer acknowledged, however, that most members of the MPC might prefer to wait if figures later in the week showed weak first quarter economic growth or soft retail sales during March.