Unanimously cautious wise men

All nine members of the Bank of England's monetary policy committee (MPC) voted earlier this month to keep interest rates at 4.75%, Bank minutes showed today.

There was no discussion of raising borrowing costs and the unanimous vote, as well as the tone of the minutes, will do little to discourage the view that rates may have peaked, analysts said.

"The MPC minutes reflect the Bank of England's current uncertainty about the growth and inflation outlook. They reinforce the view that monetary policy is set to remain unchanged for an extended period," said Howard Archer, chief UK economist for the consultancy, Global Insight.

In its minutes the Bank admitted it may have underestimated the effect on economic activity and inflation of the rise in oil prices, which the Bank described as a key risk to the world economy.

Until now, the Bank has played down the risks of rising oil prices to the UK economy. The Bank has argued that oil prices, which surged above $55 a barrel last month, are nowhere near the levels in real terms (taking into account inflation) of the oil shocks of the 1970s and 1980s. Mervyn King has also pointed out that the impact of oil prices is much less on the UK's economy than those of other countries because it is broadly self-sufficient.

The committee also said it might have underestimated the impact of the slowdown in house prices on the economy.

"The committee did not expect a less buoyant housing market to imply a substantial weakening of household spending. But there was a risk that the committee had underestimated the potential impact," the minutes said.

In its quarterly UK economic forecast, the British Chambers of Commerce (BCC) predicted that the economy will slow down earlier than expected against a backdrop of rising interest rates and record oil prices, research suggested today.

The BCC slashed its forecast for GDP growth next year to 2.4% from 2.6%, well below the level predicted by the chancellor, Gordon Brown. The BCC said the slowdown could rule out the need for further rises in interest rates and the Bank of England was likely to freeze the cost of borrowing until February at the earliest.

David Kern, economic adviser to the BCC, said: "It is clear that further interest rate rises ... may be very dangerous for business since confidence is falling and the recovery may be stumbling."

The BCC warned that the chancellor would have to raise up to ?10bn in extra taxes if he wanted to avoid breaking his "golden rule" on public borrowing.