Two members of the Bank of England's monetary policy committee voted for a rise in interest rates at its August meeting, minutes show, the first time there has not been a unanimous decision in over three years.
Martin Weale (pictured below) and Ian McCafferty argued the continuing fall in unemployment alongside survey evidence of tightening in the labour market meant wage growth was likely to pick up, and pushed for the Bank to 'anticipate labour market pressures by raising the Bank rate in advance of them.'
While the pair voted for a 0.25% interest rate rise to 0.75%, the majority of members argued 'there remained insufficient evidence of inflationary pressures to justify an immediate increase' in the rate, arguing the economic growth rate would moderate. They said that by delaying a hike it would 'allow the expansion to become more entrenched, while raising the rate too early could increase 'the vulnerability of highly indebted households'.
James Knightley, economist at ING, said: 'We expect that Weale and McCafferty will remain in the minority for a while yet.'
'Yesterday's low inflation numbers, the lack of wage growth and concerns about eurozone growth - the UK's largest trade partner, suggest that in the absence of upside activity data shocks the majority will continue to opt for the status quo in the next few months. Indeed, it currently looks more likely to be February when we see the first rate rise than our current published forecast of November.'
The news sent the pound rising off four-month lows to $1.6640, as investors anticipated a rise in interest rates in five months time. Expectations of an interest rate rise had been pushed back to March after the Bank of England slashed its forecasts for 2014 wage growth to just 1.25% in its quarterly inflation report last week.
Bank of England governor Mark Carney has meanwhile been accused of operating a pact with chancellor George Osborne to keep interest rates on hold until after the general election. Mark Field, the Conservative MP for Cities of London and Westminster, told The Times: 'I've long been sceptical that you can have a genuinely independent Bank of England, especially this close to an election.'
John Mann, a Labour member of the Treasury select committee, earlier this week said Carney was trying to delay a rate rise until after the election in May.