Bank's interest rate dilemma unveiled

A report published today by the Bank of England shows that its Monetary Policy Committee (MPC) was split three ways over this month's interest rate decision.

Two weeks ago, the committee announced plans to keep rates at 5%, but the report shows that it was by no means a clear cut conclusion.

Tim Besley urged the committee to raise the cost of borrowing by 0.25%, the minutes of this month's meeting reveal, while fellow committee member David Blanchflower voted for a rate cut.

However, seven other MPC members opted to keep rates steady in a bid to bring inflation down to its target of 2%.

Speaking to AFP, Capital Economics analyst Jonathan Loynes said: "The tone of the (August) discussion confirms that the interest rate debate remains finely balanced for now."

"Accordingly, there is little here to suggest that other members are about to join Blanchflower in voting for a cut in the very near future."

The British Chamber of Commerce wants the Bank of England to start slashing interest rates as soon as inflation peaks in the next few months.