Bank of England debate on interest rates to intensify in coming months

The committee voted unanimously in May to keep rates at their record low of 0.5pc and its stock of asset purchases at £375bn. There was also agreement that there was more room for the economy to grow without pushing up inflation. However, the minutes stated: "The Committee would continue to refine its views as the economy evolved, and for some members the monetary policy decision was becoming more balanced."

Economists were surprised by the extent of active discussion at the meeting, which was held before May's Inflation Report. Last week, Mark Carney, the Bank's Governor, said rates would remain at their record low of 0.5pc for "some time" while the recovery became more entrenched.

"We had expected some erosion of the consensus to be conveyed but not to this extent," said Ross Walker, chief UK economist at RBS.

"It’s clear from the minutes that there is a more active discussion on the Committee than last week’s Inflation Report would give the impression of," added David Tinsley, chief UK economist at BNP Paribas.

"This hasn’t got to a point yet where there is a serious split emerging. But over the next few meetings we do expect these discussions to evolve further, especially if UK data continues to show the sort of strength seen in today’s retail sales report. We would not be surprised if by around the summer one or more MPC members were voting for a hike."

Wednesday's minutes repeated that there was “considerable uncertainty” and a “range of views” over the extent of spare capacity in the economy, which the Bank estimates is between 1pc and 1.5pc.

However, Martin Weale, who voted for rate rises in 2011 along with the Bank's outgoing chief economist Spencer Dale and former MPC member Andrew Sentance, believes the output gap is closer to 0.9pc.

The committee also reiterated comments by Mr Carney last week that interest rates would only be used as a "last line of defence" against financial stability risks such as an overheating housing market, even though keeping rates lower for longer "ran a greater risk of a build-up in financial imbalances".

The Financial Policy Committee, which is in charge of financial stability and led by Mr Carney, will meet next month. Some economists expect the FPC to tighten mortgage lending rules further, or require banks to carry more capital against the risk of mortgage defaults.

Charlie Bean, the Bank's outgoing Governor for Monetary Policy, said on Tuesday that raising interest rates might be the only effective tool the Bank of England has to cool the housing market .

Mr Bean said that while it was sensible for the Bank to use macro-prudential tools to control rapid price rises and manage financial stability risks, the untested nature of such measures meant interest rate rises could end up being the "only game in town" to deal with an overheating market.

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