Uncertainty over the next move in monetary policy grew yesterday after minutes revealed a rift at the heart of the Bank of England that could stall a further rise in interest rates.

The minutes of this month’s meeting of the Bank’s Monetary Policy Committee showed that the decision to increase rates by a quarter point was passed by six votes to three. The majority was narrower than expected, causing analysts to scale back their fears of a follow-up increase in August.

Mervyn King, the Bank’s Governor, voted for the rise in the face of opposition from both Rachel Lomax, his deputy governor for monetary policy, and Charles Bean, the Bank’s chief economist. David Blanchflower, the MPC’s perennial dove, also voted against the increase.

The minutes showed that Kate Barker, seen as one of the panel’s “swing voters”, and Paul Tucker, an instinctive hawk who nevertheless dislikes surprising the market, switched sides from the previous month to support the rate rise.

The pound slipped back after climbing to a 26-year high of $2.0547 before the minutes were published.

The prospects of a pause in the Bank’s rate-tightening campaign also received a boost from data on the labour market, which showed that average earnings growth including bonuses, the benchmark measure of wage pressures, fell to 3.5 per cent in May from 4.1 per cent the month before. It was the weakest increase for 18 months. Unemployment fell by 35,000 on the survey-based measure, the largest decline since December 2003. Employment rose by 93,000 as the size of the labour market grew.

Worries that rates would have to rise further had been strengthened by the news that “core” inflation, a measure which excludes energy, food, alcohol and tobacco, was at its highest level for ten years. Following the five rate rises over the past year, the MPC now believes that “monetary policy [is] probably only just on the restrictive side”, the minutes show.

However, the panel gave no clear signal over whether higher rates would be needed to bring inflation back to its 2 per cent target. Instead, MPC members split into three groups. The most doveish pointed to weakness in the labour market as a sign that the economy was not running much above its “speed limit”. They argued that consumers had yet to feel the strain from higher rates and a higher exchange rate, and that a gradual approach was the best strategy.

The most hawkish group argued that any delay in raising rates would run the risk that they would eventually have to go higher – although, the minutes noted, “no immediate judgment was being made about the future path of rates”.

The third group, which supported this month’s rate rise, argued that it simply represented the increase predicted by the MPC’s inflation forecasts in May. They said there was no “clear presumption” that further increases would be necessary.

Geoffrey Dicks, of RBS Financial Markets, said: “For the MPC to call a halt we are going to have to see the economy slowing . . . there is no obvious sign that this is happening yet.”

The hawks pointed to “clear” survey and other evidence of pressure on firms to work at full capacity, “buoyant” corporate activity, strong money and credit growth and a lack of evidence of either a housing or a consumer slowdown.

The minutes added that there was also a growing risk from import price pressures against the background of a strong global economy. If inflation in the price of goods continued at its current rate, “then domestic services inflation would need to be lower than it had been in recent years to be consistent with the inflation target”.

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