Interest rates vote was almost unanimous

Only one member of the Bank of England's monetary policy committee opposed this month's decision to cut interest rates to their lowest level since 1955, it emerged today.

Rachel Lomax, the new deputy governor, was the sole dissenter in the 8-1 vote as the Bank trimmed rates by 0.25% to 3.5% in a "precautionary rate reduction", Bank minutes showed.

At the time, the MPC's decision caught analysts by surprise, and did much to dispel the hawkish reputation of the Bank's new governor, Mervyn King. Its one-sided nature will also come as a surprise to the City, which had predicted a close vote.

A key factor for MPC members was the rebound in the pound. Earlier in the year, members wanted to wait and see whether a weaker pound would boost exports and contribute to growth.

However, a softer pound failed to have the desired effect, with the economy growing by only 0.1% in the first quarter. Since then, sterling's fall has been reversed.

MPC members also felt that a cut in interest rates posed less risk in boosting already high levels of household debt because of the slowdown in the housing market, while a short-term rise in underlying inflation had not changed expectations that prices would remain at the government target of 2.5%.

The committee remained concerned at the hesitant nature of the global economic recovery, and a big question mark hung over the US economy.

"A key issue was whether investment in the US would pick up before consumption eventually slowed," Bank minutes said.

"The rise in equity prices and fall in government bond yields in recent months would support recovery, but the balance of economic data had been weaker than expected, especially in the euro area."

The minutes followed a gloomy survey from the CBI yesterday, which showed domestic and export orders continuing to fall, despite the weaker pound at the start of the year. The weak CBI industrial trends survey prompted analysts to predict another interest rate cut sooner rather than later.

Commenting on the minutes, Liberal Democrat MP David Laws said: "The majority of MPC members are worried about an economic slowdown.

"This can no longer be passed off as simply being a global problem. It is a
British problem as well ... the UK economy now has a major headache, and Gordon Brown's optimistic forecasts are no cure."

The latest forecast from the Ernst & Young Item Club, which uses the Treasury's own economic model to produce its forecasts, expects UK growth to be only 1.7% this year and 2.5% next year.

That contrasts sharply with Mr Brown's projected 2% to 2.5% growth this year, and 3% to 3.5% next year.