Minutes from the Bank of England's Monetary Policy Committee (MPC) meeting this month revealed a three-way split at the top of the bank for the first time since May 2006, as two members voted to keep the interest rate unchanged.

Six members voted in favour of a quarter-point cut, including Mervyn King, the Governor of the Bank, arguing that a move would reduce the risk of the economy slowing sharply, while three voted against.

David Blanchflower, always the most doveish member of the committee, stood alone for a 50-basis-point cut to 4.75 per cent.

Tim Besley and Andrew Sentance, the arch hawks, wanted to keep rates steady at 5.25 per cent.

Borrowing costs were reduced by a quarter-point from 5.25 per cent to 5 per cent.

The pound rose after the news that the policymakers were more divided than expected, as analysts said that the chances of a series of rapid rate cuts was now significantly lower.

Most economists had expected an unanimous verdict in favour of cutting, but the minutes of the committee revealed the confusion surrounding the domestic environment and the risks to inflation.

Rachel Lomax, the Deputy Governor, Sir John Gieve, Kate Barker, Charles Bean and Paul Tucker all voted in favour of a quarter-point rate cut.

David Kern, economic adviser to the British Chambers of Commerce, welcomed evidence that most of the MPC members understood the seriousness of the situation in the UK credit markets.

He said: "The minutes acknowledge the further deterioration in the outlook for the supply of credit, whilst the worrying messages in the latest credit condition survey may have damaging effects on business.

"It is very important to ensure that the problems in the mortgage market do not damage the business sector. We still urge the MPC to cut rates to 4.75 per cent in May, to counter these dangers."

Howard Archer, chief UK and European economist for Global Insight, said: "Overall, the minutes highlight the MPC's ongoing very difficult position as it faces serious downside risks to the growth outlook but also current elevated inflation pressures."

Mr Archer said: "The committee is currently particularly concerned that current elevated inflation levels — primarily resulting from higher utility and food prices, as well as a markedly weaker pound — could lift inflation expectations and thereby have significant second-round effects through affecting the behaviour of price and wage setters."

Global Insight is forecasting the next 25-basis-point cut, to 4.75 per cent, to happen in June, but said that it would not rule out a May cut at this stage.

Ross Walker, af Royal Bank of Scotland, said that the split vote was significant because the consensus appeared to be breaking down.

Of the three members who voted against a quarter-point cut, Mr Besley and Mr Sentance conceded that borrowing costs needed to come down at a measured pace but said that recent economic news did not justify a move in April.

Mr Blanchflower, who alone argued for a 50-basis-point cut, was worried by survey evidence that he believed suggested Britain could suffer a sharp US-style slowdown.

Some of the six who voted in favour thought that downside risks to inflation had increased but others said that given the increase in prospective near-term inflation, the issue was less clear-cut.

“A reduction in Bank rate now would also reduce the 'tail' risk of an unexpectedly sharp slowdown in demand later in the year, which if it materialised might then require a more vigorous policy response in order to hit the inflation target further out,” the majority of MPC members thought.

Members also noted that the housing market was weakening but said that some fall in the ratio of house prices to earnings was probably warranted.

However, they added that it was "still unclear how far these housing market developments would amplify the expected slowdown in consumption growth."

There was also concern that soaring energy prices were pushing up inflation in the near term.

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