The Bank of England's rate-setting committee voted 8-1 to keep rates on hold at 5 per cent this month, after none of its members recommended a rate rise for the first time since June.

David Blanchflower, the arch-dove on the nine-member Monetary Policy Committee, voted for a 50 basis point cut during the meeting at the beginning of September.

While the MPC said a cut in the interest rate would help prevent inflation from falling below the Government's 2 per cent target in the medium term, it concluded that upward pressure on prices remained the biggest immediate concern.

Members also highlighted the increasing danger from a weakening pound, which is pushing up import prices.

Inflation is currently at a 16-year high of 4.7 per cent, rising from 4.4 per cent in July.

It also emerged today that UK unemployment is at nine-year high after rising by 81,000 in August, while the number of people claiming unemployment benefit rose by 32,500 last month — the sharpest increase since 1992.

Mervyn King, Governor of the Bank of England, was hawkish in his letter to Chancellor Alistair Darling yesterday to explain why inflation remained above target.

Mr King's comments suggested that the MPC had become "firmer" in its belief that inflation needs to be kept under control.

However, in the minutes, the MPC emphasised that it would take all new developments into consideration when deciding on rates.

"It was more than usually important to stress that the committee would continue to make its judgment each month on the basis of the changing evidence", the minutes said.

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