The Bank of England this month began considering the case for a cut in the cost of borrowing, fuelling hopes that interest rates may have peaked.

Minutes from the December meeting of the Bank's Monetary Policy Committee (MPC) showed that some members felt the next move on interest rates may be down.

In their view, the MPC had more room to manoeuvre because the chances of inflation undershooting the 2% target in two years' time had increased.

But this did not amount to a "persuasive case" for a rate cut and the MPC unanimously agreed to keep rates unchanged at 4.75% for the fourth month in a row.

The report showed that MPC members felt the chances of a global economic slowdown had risen since November, even though oil prices had fallen back from record highs.

The housing market continued to falter but this had not led to a sharp slowdown in UK consumption growth, it added.