Minutes of the committee's August 3-4 meeting published today show King, Deputy Governors Rachel Lomax and Andrew Large and executive director Paul Tucker thought inflation might be a problem and opposed the cut.

They were outvoted by the other five committee members, including Bank of England chief economist Charles Bean, marking the first time the governor has been in the minority on any decision since the team began setting interest rates in 1997.

After the minutes were released the pound rose to its highest level against the euro since the July 7 bombs in London and government bonds fell as dealers pared forecasts of rate cuts.

"The Committee's latest projections did not support the current market view that a sequence of interest rate cuts was likely to be needed," those who voted for steady rates argued, according to the minutes.

Only two weeks ago, financial markets were pricing in a fall in official interest rates towards 4.0 percent, but the committee believes such an outcome would most likely push the inflation rate significantly above its 2.0 percent target.

But the four were outgunned by the remaining five members led by BoE chief economist Charles Bean who thought not cutting rates in August would have damaged confidence and early action could prevent the need for bigger moves later.

Analysts had predicted only one member would have opposed the cut and the minutes are likely to reduce expectations of future interest rate cuts.