Lone voice calls for rate rise at Bank

Further signs that interest rates may have peaked came yesterday with news of slower growth in average earnings and a rise in the claimant count.

In addition, minutes from the Bank of England's monetary policy committee (MPC) showed that only one of its nine members voted for a rate increase at last week's meeting.

The Office for National Statistics said the pace of overall annual wage growth dropped to 4.6% in the three months to March from 4.7% in the three months to February. Stripping out volatile bonus payments, wage growth fell to 4.1%, the lowest since April last year. The MPC becomes concerned if average earnings growth exceeds 4.5% so will be relieved by the data.

The claimant count measure of joblessness rose by 8,100 to 839,400 in April. It was the third monthly rise in a row, something not seen for two years. The jobless rate was steady at 2.7%.

But on the wider Labour Force Survey measure, unemployment fell by 15,000 in the first quarter of the year to 1.4 million, or 4.7% of the workforce. Employment rose a hefty 87,000 in the period to 28.6 million, just short of a recent record high and showing that the labour market remains tight. Growth in full-time private-sector jobs was the fastest since records began in 1992, suggesting the private sector is replacing the state as the main source of jobs.

Gordon Brown told a trade union conference: "The figures today showing employment rising are confirming that the economy is on a course giving us stability and growth."

But the Tories seized on the rise in the claimant count, which took it back up to the level of June last year.

Sir Malcolm Rifkind, the shadow work and pensions secretary, said: "These figures are terrible news for all the people who've lost their jobs. [Labour's] New Deal has failed; there are a million people trapped on incapacity benefit who want to work, and there are a million young people not in work or education."

Meanwhile, the minutes of the Bank's most recent rate meeting on May 9 showed that the committee voted 8-1 to keep rates on hold, with the deputy governor, Sir Andrew Large, still holding out for an interest rate rise because of his concerns about soaring consumer debt.

But another MPC member, Paul Tucker, changed his mind from the rate rise he had voted for in the previous three months to go for "no change".

The City had expected a unanimous vote for no change after a run of weak economic data, so markets were slightly unsettled by the fact that Sir Andrew still favoured a rate hike. The minutes showed that the committee was still concerned about inflationary pressures but also about the current unexpected weakness in consumer spending.

Howard Archer, an analyst at the consultancy Global Insight, said the minutes supported his view that rates had peaked. "Even so, we do not expect an interest rate cut until early 2006, unless there is sustained evidence of significant consumer retrenchment over the coming months."