Pound falls on hints that interest rates have peaked

The pound tumbled to a nine-month low against the euro yesterday after the publication of October's minutes of the monetary policy committee showed there had been no discussion of a possible rate increase, fuelling speculation that interest rates have peaked.

The Bank of England's nine-strong committee voted unanimously to leave rates unchanged at 4.75% at its meeting this month. The committee has increased rates five times since November last year.

The minutes added to the significance of November's inflation report, with analysts speculating that the MPC would be strongly guided by its detailed analysis.

Although economists were unsurprised by this month's move to "effectively delay" a further decision until November, many think more rate rises are unlikely. "It is difficult to see what information they might have in November which will produce a change in rates," said Geoffrey Dicks, of the Royal Bank of Scotland.

The minutes pointed to recent data which showed economic growth was beginning to falter - the manufacturing sector appears to be slowing down and there are signs the same is happening to the service sector. The MPC also pointed to a decline in consumer spending.

Despite the rise in the cost of oil and a tightening labour market, there appears to be little evidence of inflationary pressures, noted the committee. The MPC adjusts interest rates to ensure that inflation hits its 2% government-set target in two years' time. Inflation in September was only 1.1%.

Elsewhere, the public finance figures showed a higher level of government spending last month than for any September since records began in 1984. The public sector net cash requirement was £10.8bn in September, well above the £8.1bn forecast.

Extra cash was needed for British troops in Iraq as well as for the start of the school year. But income and corporation tax receipts continued to grow strongly, by almost 9% and 14% respectively in the year to date compared to the same period last year.

Economists said that Gordon Brown should just manage to meet his golden rule - to borrow only to invest over the economic cycle.