Bank of England governor Mervyn King and three other officials voted against cutting interest rates in August, denting expectations that Britain's nine-strong monetary policy committee would trim borrowing costs again soon.

Minutes of the committee's August 3rd and 4th meeting, published yesterday, showed Mr King, deputy governors Rachel Lomax and Andrew Large and executive director Paul Tucker thought inflation might be a problem and opposed the quarter-point cut to 4.5 per cent.

They were out-voted by the other five committee members, including Bank of England chief economist Charles Bean, marking the first time the governor has been in the minority on any decision since the team began setting interest rates in 1997.

"This means rates are on hold for quite some time until the economic data decisively point in favour of another interest rate cut," said Philip Shaw, chief economist at investment bank Investec. "There could even be some speculation at some point that the next move in rates will be upwards."

Analysts had predicted that eight policymakers would have backed the cut - the first in two years - aimed at boosting flagging consumer spending after economic growth slowed to its weakest pace in 12 years in the second quarter of 2005.

After the minutes were released, the pound rose to its highest level against the euro since the July 7th bombs in London and government bonds fell as dealers pared forecasts of rate cuts.

"The committee's latest projections did not support the current market view that a sequence of interest rate cuts was likely to be needed," those who voted for steady rates argued, according to the minutes.

Only two weeks ago, financial markets were pricing in a fall in official interest rates towards 4 per cent, but the committee believes such an outcome would most likely push the inflation rate significantly above its 2 per cent target.

Policymakers who voted for a rate cut argued that while record oil prices might push up inflation in the short term, weaker demand in the first half of the year should reduce price pressures ahead.