Two Bank of England policymakers voted this month to cut interest rates to revive consumer spending but the majority wanted more time to see if lower rates were needed, minutes of their meeting showed today.
This was the first time anyone on the nine-strong Monetary Policy Committee had called for a cut since July 2003.
Government bonds and interest rate futures surged as markets priced in lower borrowing costs in the months ahead.
Minutes of the Monetary Policy Committee's June 8th and 9th meeting showed BoE Chief Economist Charles Bean and Marian Bell, who will be replaced by David Walton next month, wanted an immediate quarter-point rate cut.
But the rest of the MPC opted to leave rates at 4.75 per cent for the 10th month running as the inflation outlook had not changed so much since May and the competing risks of slowing consumer spending and inflationary pressures had not been resolved.
"There was time to gather further evidence on the depth and extent of the slowdown in consumption to see if lower interest rates were warranted," the minutes said.
"A reduction in interest rates at this juncture ...would run the risk of the inference being drawn that the Committee believed the situation had deteriorated more than it in fact thought."
The news added to speculation that interest rates are now on a downward track in Europe, coming a day after the Swedish central bank surprised markets with a half point cut which took the country's key rate to a new record low of 1.50 percent.
Economists said it was significant that the MPC in Britain now seemed to have more of a bias to easing monetary policy. Only a month ago Deputy Governor Andrew Large had wanted a rate hike.