Bank voted 8-1 for cut to 5.25%

The Bank of England lowered rates to 5.25% in February

The Bank of England's rate-setting Monetary Policy Committee (MPC) voted by 8-1 to cut interest rates to 5.25% earlier this month, minutes have shown.

The bank decided to lower rates by a quarter of a percentage point from 5.5% in February, amid signs of a slowdown.

David Blanchflower was the only member who voted differently, favouring a larger cut in rates to 5%.

The MPC said markets continued to be stressed and there was potential for greater tightening in credit ahead.

Analysts have highlighted that the Bank faces the threat of a slowing economy at a time when inflationary pressures are rising.

Some economists have interpreted the minutes as a sign that rates will be reduced further, though not aggressively.

"It seems that the MPC is ready to do more in terms of monetary easing but at this stage it seems the message they are trying to send is that they are not prepared to do as much as the market was hoping," said Audrey Childe-Freeman, economist at CIBC World Markets.

Prospects for output growth had deteriorated and the disruption to global financial markets had continued Bank of England MPC minutes

February's interest rate cut was the second lowering of UK rates in three months, with the previous reduction coming in December last year.

Slowdown warning

While the UK has lowered rates, the reductions have been less dramatic than in the US where the Federal Reserve has lowered rates from 5.25% in September 2007 to the current rate of 3%.

The minutes of the MPC's latest meeting said "uncertainty about the future path of interest rates had risen internationally".

The committee highlighted lower consumption growth and slowing retail sales. It added that the mortgage sector had declined, with mortgage approvals reaching their lowest since 1995.

The risk I believe to be of most concern is around the interplay between the property market and the financial sector resulting from the credit turmoil Kate Barker, MPC member House price 'threat' to economy

Mr Blanchflower was keen for more attention to be paid to the risk of a "very sharp slowdown" in UK growth.

Howard Archer, chief economist at Global Insight, said: "The Bank of England remains particularly concerned that a near-term sharp spike up in inflation resulting from higher energy, food and import prices will lift inflation expectations and thereby affect the medium-term behaviour of price and wage setters."

On Tuesday evening, MPC member Kate Barker said: "The risk I believe to be of most concern is around the interplay between the property market and the financial sector resulting from the credit turmoil".

Uncertainty remains

The minutes said that "prospects for output growth had deteriorated and the disruption to global financial markets had continued", and singled out problems in the sub-prime sector as a concern.

The MPC noted that some banks had revised their write-downs relating to the sub-prime sector, adding that "there remained considerable uncertainty in financial markets about the positions of firms that had yet to report any significant losses".

The minutes come as UK banks are reporting their annual results for 2007. Earlier on Wednesday, Alliance & Leicester reported a 30% drop in profits after it wrote down exposure to risky assets that have been hit by the turmoil on the world's credit markets.