Andrew Sentance, a member of the Bank of England's Monetary Policy Committee (MPC), today heightened hopes that another interest cut could be on the way amid forecasts that the UK had already entered a recession.

Speaking in London, Mr Sentance said: "It now seems to me more likely than not that we will see a fall in GDP for the third and fourth quarters of the year." A technical recession is defined as two quarters of falling GDP.

Mr Sentance added that the chances of the economic downturn lasting for a year or more had also risen as the financial turmoil continued.

He said: "Until recently, my view has been that there was a low probability of a severe recession akin to these earlier episodes.

"But the severe stresses in the financial system over the last month, and the downside news from the real economy have certainly increased the risks of a bigger and more sustained downturn."

Last week, the National Institute of Economic and Social Research calculated that the economy contracted by 0.2 per cent in the three months to the end of September. But official figures will not be released until the end of this month.

Hopes that the Bank could be set to make more rate cuts after last week's emergency half point reduction to 4.5 per cent gathered pace after Mr Sentance said that the MPC's concerns over inflation had subsided as increasing evidence emerged that price pressures were easing.

Its concerns over inflation, which has spiralled to a 16-year high, had, before last week's move, stayed the MPC's hand over making any rate cuts over the previous five months.

Mr Sentance is one of the more hawkish members of the MPC and, since the beginning of 2007, has voted three times to raise rates and once to hold, when the rest of the Committee pushed for a cut.

Figures from the British Retail Consortium released last week showed that shop prices did not change at all in September, while new figures out this morning showed that factory gate prices fell for the second month in a row.

"We can now be much more confident than we were a few months ago that inflation will come back to the 2 per cent target over the medium term."

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