The Bank of England’s rate-setting Monetary Policy Committee (MPC) split three ways this month, for a second month in a row, with one member again voting for an immediate rise in interest rates.

The news today that Tim Besley, the MPC’s most hardline member, broke ranks for a second time to press his case for higher rates fuelled City uncertainty over the Bank’s likely next move.

Professor Besley’s tough stance, which saw him argue that a rate rise is necessary to reinforce the Bank’s inflation-fighting credibility, comes after headline inflation surged last month to 4.4 per cent, more than twice the MPC’s target and its highest level for 16 years.

The backing for a rate increase from Prof Besley, an external MPC member, at its meeting a fortnight ago was only the second vote on the committee for dearer borrowing costs since June last year.

However, the majority of the MPC again rejected the professor’s arguments, with seven of the nine members voting to keep rates pegged at 5 per cent for a fourth month in a row, despite them having seen the worse-than-expected July inflation figures.

Professor David Blanchflower, the Bank’s arch-dove, backing a quarter-point cut for an eleventh month in a row, again argued that inflation would be undercut in the coming months as the economy stalls and teeters on the brink of recession.

The unusual three-way split emerged today in Bank minutes of the MPC meeting and was only the second such division among the committee since May 2006.

The divergence of views reflects the intensity of the conflicting pressures on the economy, with growth faltering and expected by the Bank to grind to a halt for several quarters, and inflationary pressures continuing to mount in the near term.

The record of this month's MPC debate showed that members fretted that both sets of dangers to the economy's prospects had grown more severe since May. The immediate outlook for inflation had grown worse, while the threat of a steeper slowdown in economic activity had also mounted. The MPC noted, however, that while the news on growth prospects had steadily deterioriated, developments over risks from inflation "had been more mixed".

The MPC mulled all three potential options for interest rates _ a cut, an increase, and no change _ and agreed that each choice carried its own dangers. However, the majority of the committee agreed that raising base rates could trigger too sharp an economic downturn, driving inflation below its target in future and adding to volatility in the economy.

At the same time, the majority were also concerned that any rate cut could lead to workers believing that the Bank was not serious about quelling inflation and so spark inflation-busting pay deals.

Despite rising inflationary pressures stoked by soaring gas and electricity prices, most City economists continue to see an increase in interest rates as a relatively remote threat for now, a view that was reinforced by what the financial markets took as a doveish quarterly Inflation Report from the Bank last week.

In its quarterly forecasts, the Bank predicted that growth in the economy would stutter to a halt during the late summer and autumn and then remain close to zero well into next year.

Although the Bank projected that inflation would climb higher and is set to hit 5 per cent in the next few months, it dampened expectations that rates could rise and boosted hopes of an eventual cut as it forecast that inflation would then rapidly subside, and drop back to its target over the coming two years if rates were kept broadly unchanged.

Some City economists have cautioned, however, that speculation that interest rates could fall as soon as November has become excessive and that the Bank's projections imply that this is unlikely.

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