The first call in a year from a member of the Bank of England’s Monetary Policy Committee for an interest-rate rise has increased expectations that the next move in the cost of borrowing will be upwards.

MPC minutes published today showed that the committee was split three ways over interest rate policy for the first time in nearly eight years at its meeting earlier this month.

However, City economists argued that "the real story" was the emergence of a call for an interest rate rise from David Walton, an independent member of the Bank's rate-setting body.

Later in the day, stocks dropped sharply in London and New York after US inflation data revealed an unexpectedly sharp rise in consumer prices, heightening fears that the Federal Reserve may not be ready to pause its two-year campaign of fiscal tightening.

In the UK, six members of the MPC, including Mervyn King, the Governor of the Bank, voted to keep interest rates unchanged at 4.5 per cent.

Steve Nickell, taking part in his final meeting, called for a quarter-point reduction in borrowing costs for the sixth month in a row.

In a poll conducted by Reuters last week analysts had expected a 7-1 vote, with Mr Nickell seen sticking to his long-held view that a 0.25 per cent cut is necessary.

This morning, the news that Mr Walton adopted a more hawkish stance reinforced perceptions that the Bank is concerned over the impact of sharply higher oil prices, which rose 10 per cent in the month before the May 3 meeting.

Thushani Gajasinghe, an economist for the Centre for Economic and Business Research said: "Walton’s vote … will increase interest rate expectations and suggests that the MPC is becoming increasingly concerned about looming inflationary pressures."

Activity in the foreign exchange markets this morning reinforced that impression. In trading after the publication of the minutes, sterling rose above $1.90 for the first time in a year.

The minutes showed that Mr Walton, who backed last August's quarter-point cut, argued that the "balance of risks to inflation, relative to the [Bank's] 2 per cent target, had shifted a little too much to the upside for comfort and that warranted an immediate increase in rates".

John Butler, the HSBC economist, said: "The absence of Nickell in June will mean the MPC now have a tightening bias."

In a more detailed than usual analysis of arguments for and against altering the Bank’s wait-and-see policy on interest rates, survey evidence indicating above-trend GDP growth and rising cost pressures in the economy was cited as backing a rate hike.

A potential squeeze on consumer spending and possible spare capacity in the economy that could put downward pressure on inflation after energy prices subside argued for a cut in interest rates, according to the minutes.

However, most members of the MPC wanted to "wait for further evidence about the likely direction of inflationary pressures" before making a move either way".

The City now expects at least one rate rise by early next year with another later hike also seen as possible.

Official figures yesterday showed that consumer price inflation hit the Bank's 2 per cent target last month, stoked by higher oil prices.

Earlier this month, the Bank’s quarterly Inflation Report also sounded a warning note over higher energy prices and utility bills.

There were only eight members of the MPC rather than the usual nine following the departure of former Financial Times editor Richard Lambert, who is moving to head the CBI.

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