Inflation fears prompted Bank pair to push for April interest rate rise

Two members of the Bank of England's interest rate committee again voted for a rate rise this month but the others remained too concerned about a slowdown in consumer spending to sanction an increase.

The minutes of the latest meeting, published yesterday, showed deputy governor Sir Andrew Large and executive director Paul Tucker continued to favour raising borrowing costs from 4.75% to keep inflationary pressures in check.

The other seven members, including governor Mervyn King, felt there was no need to rush to tighten policy further after rises last year. Rates have now been on hold for eight months.

The minutes said the monetary policy committee's main worry - that household spending could slow more rapidly than expected in the short term - had "crystallised to some degree" and the weakness of retailing over Christmas had continued into 2005.

The committee felt that with income growth and employment still robust, there was every chance that consumer spending - which has softened sharply recently - would recover.

The MPC aims to keep consumer price inflation at about 2%. Data on Tuesday showed the consumer prices index jumped to a seven-year high of 1.9%, something the MPC did not know at the time of its meeting two weeks ago.

"The data suggested that the overall risk to the inflation forecast was still to the downside," the minutes said.

Economists are divided over whether the MPC will raise rates again, possibly in May, to ensure inflation does not take off or whether it has already taken the heat out of the economy, as witnessed by a stagnant housing market.

The Nationwide yesterday became the latest lender to cut its fixed-rate mortgage deals. A two-year fix is now 4.95%, down from 5.19%.