Bank voted 8-1 to hold interest rates

Bank of England minutes today showed that, for the third month in a row, only one Bank policymaker voted to lower interest rates.

Stephen Nickell again emerged as the lone voice against the monetary policy committee's decision to hold rates at 4.5% at the start of February, with the news pouring cold water on hopes of an early cut in interest rates.

Sterling rose sharply against the dollar on market expectations that the nine-member MPC would stick to current rates level for a while.

In morning trading, sterling stood at $1.7443 against the dollar, and also rose to 68.20p against the euro.

"The minutes pour more cold water over the prospects for a near-term interest rate cut," Howard Archer, of the consultancy Global Insight, said.

"They adopt the same relatively upbeat view of growth prospects contained in the Bank of England's quarterly inflation report, while inflation is seen remaining near to its 2% target level over the medium term."

Before the release of the today's Bank minutes, there had been speculation that one or two other MPC members could join Mr Nickell in voting to cut rates.

However, the minutes said: "There was some concern that a reduction in interest rates at this stage would provide further support to the housing market and consumption at a time when GDP growth was already strengthening."

Most committee members believed the near-term outlook for growth appeared stronger than it had at the time of the November inflation report.

The committee also expressed concern about the rise in energy prices and their impact on inflation.

"Gas prices seemed likely to push up on inflation to a greater extent than had been expected in November, and there remained uncertainty about the future path of energy prices more generally," the minutes said.

Mr Nickell argued that the fall in GDP growth below its historical trend for most of the past 18 months, the recent rise in unemployment and the surveys of capacity utilisation pointed to slack in the economy.

He believed inflation was likely to fall below the 2% target once the effects of higher energy prices had dropped out of Bank calculations.

Many City economists agreed with his stance that the Bank was being too optimistic in its growth forecasts.

"Below-trend growth and continuing wage moderation should contain inflationary pressures, giving the Bank of England scope to relax monetary policy further," Mr Archer said.

"This is despite some concern that lower interest rates could excessively boost the housing market and risk sending housing prices markedly higher."