MPC voted 9-0 to hold rates amid growth concerns

Fears of an imminent rise in interest rates receded yesterday as wages growth hit a record low and the Bank of England said there was no "pressing need" for a hike.

The Monetary Policy Committee voted unanimously to keep the base rate on hold at its 38-year low of 4 per cent when it met a fortnight ago.

The minutes contained a number of hints that the committee was more concerned about the prospects for growth rather than fears over inflation.

"Sustained recovery even in the US [is] by no means yet assured," they read. "The upside risks to inflation and downside risks to the world outlook have increased."

The MPC said the news from the UK was mixed and doubted the recent growth in wages would persist while consumer spending might soon run out of steam.

"All agreed that the case for increasing rates in order to restrain consumption growth was not yet pressing," the minutes said in a sign that some members had, at least temporarily, relaxed their concern over household debt.

However, there was a warning that rates would have to rise inevitably. "For some members recent news taken as a whole added some weight to the arguments for an increase in rates, though it was by no means decisive. Most, however, took a more neutral view."

David Hillier, the chief UK economist at Barclays Capital, said the minutes showed the MPC was "inching towards" a hike in rates. "But this is not a dramatic enough development to justify the quarter-point rate increase in May that we have been talking about for some time," he said.

The markets were also reassured by the latest employment figures that showed earnings growth had slowed to a new low despite a drop in the jobless total to a new 27-year low.

The number of people out of work and claiming benefits dropped by 6,000 to 939,000 in March, the lowest since October 1975, giving a jobless rate of 3.1 per cent.

Meanwhile an extra 30,000 joined the workforce over the three months to February taking total employment to a new all-time record of 28.42 million.

But despite signs of a tight labour market, the annual growth rate for pay and bonuses slowed to 1.9 per cent in February, its lowest level since records began in 1991.

The drop was driven by a plunge of more than 5 per cent in the value of City bonuses.

Stripping out bonuses, earnings growth is running at 4.2 per cent, which is just below the 4.5 per cent ceiling the Bank believes is consistent with hitting the inflation target.

"The headline number for earnings should give the Bank of England some hope that consumer spending will moderate," said Paul Mortimer-Lee, an economist at BNP Paribas.