MPC voted 8 to 1 for cut in rates

RACHEL Lomax, the Bank of England's new deputy governor for monetary stability, nailed her hawkish colours firmly to the mast today as it emerged that she was the only member of the nine-strong monetary policy committee not to vote for a cut in interest rates earlier this month.

The minutes of the MPC's latest meeting reveal that the committee voted 8-1 to cut the cost of borrowing to a 48-year low of 3.5% on 10 July. The Bank's new Governor, Mervyn King, who also has a hawkish reputation, voted with the majority.

Lomax judged that 'the central outlook was benign and the balance of risk lay in favour of making no change in interest rates now', the minutes say. The former Permanent Secretary at the Department of Transport felt that consumer spending, house prices and the stock market were all holding up well and that lower rates would encourage consumers to take on more loans when debt was already unsustainably high.

But Lomax's eight colleagues argued that economic growth at home and abroad had been weaker than expected. Sterling's recent rally on foreign exchanges would help keep a lid on inflation, they said.

Analysts said that despite the clear-cut majority, the minutes did little to change the outlook for monetary policy. Financial markets are pricing in one more quarter-point reduction by the end of the year.