However it appears cracks have appeared amongst the MPC members and whilst seven voted to keep the bank rate unchanged at 5 per cent, namely Mervyn King, Charles Bean, John Gieve, Kate Barker, Spencer Dale, Andrew Sentance and Paul Tucker, Tim Besley voted for a 25bp rate hike and David Blanchflower voted in favour of a 25bp cut.

Since June, there had been more bad news for the inflation outlook. Gas and oil price futures had risen again. The advance estimate of CPI inflation in June had been higher than expected. Some survey-based measures of inflation expectations had picked up, particularly at shorter horizons. And measures of breakeven rates of inflation at three- and five-year horizons had also increased.

Against that, earnings growth so far had remained relatively subdued. The near-term prospects were for a higher rate of inflation than projected in the May Inflation Report and higher than the committee had believed at the time of the Governor's letter to the Chancellor in mid-June. There is also a nervousness that interest rates may go higher.

Commenting on the MPC minutes David Kern, Economic Adviser to the British Chambers of Commerce, said: "This situation, though not unique is unusual and highlights the exceptional uncertainties facing the MPC. The risks to both growth and inflation have worsened in recent months.
 
"With business confidence falling, we believe the risks to growth are more severe and more threatening at present. Any increase in interest rates would be very dangerous.  The results of the BCC's recent Quarterly Economic Survey produced very pointed warnings. While the MPC is required to bring inflation back to its two per cent target, its remit gives it latitude to do so in a fashion which does not damage the economy.
 
"It is very important to avoid monetary overkill. Inflation is likely to peak in the next few months and the MPC should then be able to consider small cuts in interest rates."
 
The slow response of oil supply to the rapid increase in demand had been an important factor behind the increase in the price of oil during recent years. There was a legacy of insufficient investment in new fields and refining capacity, so that new sources of supply had been slow to come on stream as old fields ran down. A shortage of qualified personnel and capital equipment, together with geo-political factors and regulatory constraints, had also hampered the expansion in supply. Some pundits and politicians say we have been caught short by not planning globally early enough.
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 The oil price had been volatile in recent weeks, but had ended the month some 10 per cent higher in dollar terms. Concerns about the security of supply in the Middle East and Nigeria seemed to lie behind the most recent rises. Food and metal commodity prices had also increased during the month.

The weakening in the housing market accorded with the reduced availability of secured credit to households as reported in the Bank's Credit Conditions Survey. The survey suggested that there was a further tightening to come. Unsecured credit availability was also reported to have been reduced.

Tighter credit conditions might have been relevant for some businesses, but many appeared to have been unaffected so far, probably because they had a cushion of retained earnings or access to already committed facilities which they could draw down.