Read the panel's views in full

The Bank of England should today reject demands for a further cut in interest rates because decisive evidence of a serious economic slowdown is yet to emerge while inflation dangers still persist, a majority of The Times Monetary Policy Committee says this morning.

In a knife-edge vote that reflects what the City sees as the closest of calls over today’s verdict from the Bank, The Times panel of economic and financial experts voted by five to four to recommend that borrowing costs be kept at 5.5 per cent, in the wake of December’s quarter-point cut.

The doves on The Times MPC argued forcefully for a fresh cut in rates, in what would be the first back-to-back move by the Bank since June 2004. They pointed to a growing threat to the UK outlook from a sharp downturn in America and the global credit squeeze.

Two of the four doves also said it was clear that rates needed to fall still further, by another half-point in total, over the next few months.

The more hawkish group narrowly prevailed, insisting that signs of weakening economic conditions were not clear enough to make the case for the aggressive step of consecutive rate cuts, with most emphasising still-lurking inflationary pressures.

Sir Steve Robson, former Second Permanent Secretary to the Treasury, said that “hand-wringing” over an economic slowdown meant that the dangers from “very real inflationary risks” and of fuelling excessive debt with cheaper borrowing costs were often overlooked. He said that there were clear inflationary pressures still to feed through from energy prices and wage demands, while indications of a slowdown in growth were mixed.

Rupert Pennant-Rea, a former Deputy Bank Governor, said that growth needed to slow and noted that the retail price inflation rate remained above 4 per cent. He and his fellow hawks also highlighted the inflation risks from the steep 9 per cent fall in the pound’s overall value during the past six months. He added that evidence did not support fears of the credit squeeze undercutting growth and said that “to cut twice in a row would look panicky”.

Martin Weale, director of the National Institute of Economic and Social Research, agreed that evidence of weaker growth was “not very strong” and that a weaker housing market should be welcomed.

Two members of the panel — Bronwyn Curtis and Sir Alan Budd — called for rates to be held this month, but struck a less hawkish stance. Sir Alan said that further cuts were “likely to be justified”, while Ms Curtis said that rates should not be lowered while the pound was falling so sharply.

Among the doves, Geoffrey Dicks, chief UK economist at RBS Global Banking, said that rates needed to fall by a half-point and that the Bank should start today with a quarter-point cut. He compared present conditions with 1998-99, when rates were “far too high” and argued that “the case for urgent, remedial action is just as strong”.

Sushil Wadhwani, a former member of the Bank’s MPC, joined the doves in citing risks from a sharp US slowdown and tightening lending conditions for corporate and household borrowers. While the pound had fallen, it was liable to rebound if rates were not cut in the next two months, he said.

Anatole Kaletsky, The Times’s chief economics commentator, and Claudio Costamagna, a former Goldman Sachs vice-chairman, also backed a rate cut. Mr Kaletsky said that Britain was likely to follow America, with consumer spending hit by falling house prices and a credit squeeze. If the Bank did not act today, it should be ready to order a half-point cut in February.