Bank voted 8-1 to keep rates unchanged

For the fourth month running, the Bank of England's monetary policy committee voted 8-1 to keep interest rates unchanged, minutes showed today.

Stephen Nickell was again the lone dissenter at this month's meeting, which saw the MPC hold rates at 4.5% for the seventh successive month.

The minutes revealed Mr Nickell argued for an immediate quarter-point cut. He said GDP growth had been below its historical trend for much of the past 18 months, unemployment had been rising and surveys pointed to spare capacity in the economy.

He also cited continuing evidence of weak investment, weak consumer spending and subdued prospects for wage increases, questioning the "optimistic" growth estimates in the Bank's February inflation report.

However, the majority of the MPC thought growth had recovered from its trough at the start of last year and was now close to its historical average.

"There was some, but not much spare capacity in the economy, and inflation was close to target," the minutes said. "The outlook was, on balance, for continued growth near trend and inflation close to target."

Official figures released by the Office for National Statistics yesterday showed Britain's annual inflation rate edging up to 2% last month from 1.9% in February. The Bank's target is to keep inflation at 2% over two years.

The minutes said there was little evidence that the rise in energy prices had fed through to higher wage claims, but added that inflation expectations data would need to be monitored carefully.

Concern that soaring energy prices would boost pay claims, paving the way for higher inflation, is a key reason behind most Bank policymakers maintaining borrowing costs at their current levels.

British Gas and other utility companies recently announced prices rises of more than 20% in response to soaring wholesale gas prices.

The recent pickup in house prices will also have been caused concern to the MPC.

Some analysts still believe the Bank will lower rates later this year and say its growth forecasts are too optimistic.

"We suspect economic activity over much of 2006 will be held back by sluggish consumer spending and that the Bank of England's growth forecast will prove to be too optimistic," Howard Archer, of the consultancy Global Insight, said.

Mr Archer thinks rates will come down in August.