One of the Bank of England’s top policymakers has voted to start raising interest rates, but his other colleagues appeared in no rush to do so and forecast only a slow pick-up in inflation which sits at zero.

Ian McCafferty wanted to raise borrowing costs at the Bank's August meeting which ended on Wednesday, resulting in an 8-1 vote in favour of keeping rates at their record low of 0.5 per cent, the BoE said on Thursday. Most economists taking part in a Reuters poll had expected two members of the Monetary Policy Committee to vote for a rate hike. Some had expected three.

The MPC had previously maintained a united front on rates since January, after a fall in oil prices last year set back the prospects of the first rate rise since 2007. Few economists expect the BoE to tighten policy before the United States Federal Reserve, which is expected to raise rates later this year.

The bank said it expected inflation to be back to its 2.0 per cent target in two years’ time, in line with its previous forecast made in May despite a renewed plunge in oil prices and a strengthening of sterling in the last three months. The bank said its forecasts were based on bets in financial markets that interest rates would only start to rise in the second quarter of next year. Economists mostly expect a first rate hike in February. The strong pound and low fuel costs would continue to push down on inflation until at least the middle of next year, the bank said.

Minutes of the bank's monthly meeting, published alongside the MPC's decision for the first time as part of a new communications format introduced by Governor Mark Carney and dubbed "Super Thursday", showed "some members" saw a risk the inflation could pick up more strongly than the central forecast. But the overall tone of the minutes and the bank's quarterly economic forecasts suggested the central bank was focused on the potential for the surge in sterling to keep a lid on inflation.

Stock market turmoil in China and Greece’s unresolved debt problems cast a small shadow on the global economic outlook, the BoE said.

The BoE also noted that Britain’s weak productivity growth was finally on the rise which would also help mute inflation even after wages grew surprisingly strongly in recent months.

The bank raised its forecasts for Britain’s overall economic growth this year to 2.8 per cent from 2.5 per cent in its May forecasts but kept its growth projections for the following years largely unchanged. Mr McCafferty had voted to raise rates in late 2014, along with fellow MPC member Martin Weale. But minority support for a change in policy at the BoE rarely translates rapidly into a shift in the majority’s view.

Mr Carney said last month that the decision on when to raise interest rates would only come into sharper focus around the turn of the year.

Reuters