The odds of an April interest cut shortened yesterday after it was disclosed that the Bank of England decision to peg rates this month was closer than expected and new figures confirm that wage pressures remain tame.

Hopes among some City economists of another rate cut in a fortnight's time rose after news of a seven-to-two vote on the Bank's Monetary Policy Committee over this month's decision to hold borrowing costs was revealed by MPC minutes.

Sir John Gieve, the Bank's deputy governor in charge of financial stability, unexpectedly broke ranks to join David Blanchflower, the arch-dove among the rate-setting MPC, in backing an immediate move at its meeting two weeks ago.

After the escalation of global financial turmoil in the past week, Sir John's surprise move combined with benign figures from the jobs market to buoy the Square Mile's expectations of an early rate cut.

Other economists said that a marked reluctance to rush into rate cuts among the majority of MPC members, shown by the record of this month's meeting, and evidence yesterday of mounting inflationary pressures in industry, were likely to keep rates pegged until May, as well as limiting further moves.

Yesterday's minutes showed that Sir John and Professor Blanchflower argued this month that American economic prospects had deteriorated, financial market conditions had taken a turn for the worse, and that market stresses were expected to persist. At the same time official rate cuts since last summer had been offset by increases in market rates. A number of analysts argued that Sir John's change of stance, alongside recent financial upheavals and yesterday's benign pay figures, pointed clearly to a likely cut in base rates next month.

The pound fell sharply yesterday as that view was reinforced by official figures showing that headline growth of average earnings fell in January to 3.7 per cent, a five-month low, despite further increases in employment and falls in jobless numbers. The MPC was anxious that a rising cost of living would stoke pay demands.

Fears over the economy were also eased as the data showed that numbers out of work and claiming benefit fell by a further 2,800 last month, while on the Government's preferred survey-based measure, unemployment dropped by 32,000 in the three months to January.

Many economists argued, however, that the continued strength of the jobs market would reinforce the view of the more hawkish faction on the MPC that the global credit squeeze and financial turmoil had yet to take a clear toll on the economy.

The minutes showed that the seven MPC members who voted to hold rates this month argued that growth remained “on track” to achieve the Bank's February forecasts.

Although those forecasts were drawn up based on some further lowering of interest rates, members were worried that lowering rates this month, after February's rate cut, would signal to markets that the Bank was more worried over faltering growth than high inflation.

The hawks were given added ammunition yesterday by the latest CBI snapshot of manufacturing, which showed the proportion of manufacturers planning to raise prices was at its highest levels since May. The survey also showed industry order books at a four-month high and expectations of future output at their best for nine months.

Explore Economics

• Pre-Budget Report 2008

• Budget 2009

• World Economic Forum

• The Times MPC

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts