The Monetary Policy Committee voted six to one to raise the base rate of interest, minutes have shown.

The decision to raise the base rate of borrowing to 4.75 per cent, taken earlier in the month, was made following agreement from most committee members that inflation levels needed to be held by an increase in rates.

However, newest member David Blanchflower voted against the measure, worried that a rise could cause problems for the labour market.

Banks follow the Bank of Engalnd base rate and may raise the cost of personal loans as a result. The minutes hinted that further interest rate hikes may be required in future, citing evidence from the Bank of England's quarterly interest rate report.

Going forward, it [is] likely that the recent additional rises in energy prices and the effect of increases in university tuition fees at the start of the next academic year would push CPI inflation further above the target in the next few months, said the minutes.

In contrast, analysts stated that the MPC was unsure of inflation forecasts.

There was clearly a pre-emptive component in raising interest rates in August, and the MPC still expects many uncertainties in the medium-term growth and inflation outlooks, suggested Global Insight.

Bank holds interest rates at 4.75 per cent - 8th September 2006

Bank announces surprise interest rates rise - 3rd August 2006