LONDON (ShareCast) - Bank of England policymakers were tugging in all directions at their rate setting meeting earlier this month, with Timothy Besley arguing for a rise to help combat inflation.

The professor became the first Monetary Policy Committee (MPC) member to call for higher borrowing costs in over a year, minutes from the July 9-10 gathering revealed today.

As expected, perennial dove David Blanchflower voted for a quarter point cut, but the other seven MPC members, including governor Mervyn King, won the fight to keep rates at 5% for the third month in a row.

Analysts fear Besley may eventually get his way as soaring food and fuel prices sent annual inflation to 3.8% in June, the highest since records began in 1997.

He worries that rampant inflation could hurt the Bank’s credibility, but Blanchflower argues a cut is needed to help cushion “several quarters” of economic contraction.

King has previously warned that the MPC is prepared to take “whatever action is needed" to get inflation back to its 2% target, fuelling speculation that rates will rise this year.

But British Chambers of Commerce Director General David Frost has talked of a “real risk of recession in the coming months.”

“This is deeply worrying and not just for business but for the consumer too, with both manufacturing and services reporting negative results,” he added.

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