Hopes that the Bank of England will follow America's lead with dramatic interest rate cuts were dashed today after policymakers warned the UK's inflation outlook had "worsened markedly".
Minutes of the January rates meeting highlighted the dilemma faced by the Bank's Monetary Policy Committee (MPC) after members raised concerns over a potent mix of slowing growth and rising inflation.
The minutes come amid growing calls for a 0.5 per cent cut in the cost of borrowing when the Bank next meets to discuss rates on February 6th and 7th.
A shock decision yesterday by the US Federal Reserve to slash the cost of borrowing by 0.75 per cent has added to pressure on the Bank to lower rates.
But Bank Governor Mervyn King last night signalled that the UK would not follow America with similar emergency rate cuts to stabilise stock market and economic turmoil.
And today's minutes showed that the Bank was concerned that hasty rate cuts would suggest it was more concerned about preserving economic growth than keeping inflation under control.
Eight out of nine members of the MPC voted to keep rates on hold, with David Blanchflower the lone voice pressing for a reduction to 5.25 per cent.
The minutes showed the Bank's concerns that the short-term outlook for inflation had "worsened markedly" amid soaring oil and food costs and with energy price hikes on the horizon.
Mr King cautioned in a speech last night that inflation was set to continuing creeping up past the Government's 2 per cent target this year.
He told the Institute of Directors in Bristol that he may need to write one or possibly more open letters to the Chancellor - required when inflation hits more than 1 per cent above target.
But the minutes today showed the MPC's struggle to balance inflation with growth, as it said it there remained a "significant downside risk to UK activity".
It suggested it would rather digest next month's quarterly report on inflation before acting on rates.