The Bank of England was urged to cut interest rates by 0.5% this month by one of its key policymakers, it has emerged.

David Blanchflower told colleagues on the Monetary Policy Committee that a "larger, precautionary reduction" than 0.25% was needed.

But minutes of their meeting show the other eight members of the MPC all plumped for a quarter-point cut to 5.25%.

The Bank is currently battling to contain inflation in the face of easing economic growth and fears aggressive downward moves could push the cost of living up drastically.

Howard Archer, chief UK economist at Global Insight, said the minutes suggest that further interest rate cuts are on the horizon, although MPC members are reluctant to act too aggressively.

He said: "The Bank of England remains particularly concerned that a near-term sharp spike up in inflation resulting from higher energy, food and import prices will lift inflation expectations and affect the medium-term behaviour of price and wage setters.

"At the same time though, the MPC expects growth to slow markedly this year in the face of tighter credit conditions and significant downward pressures on consumer spending."

The news comes after another member of the MPC warned that falling house prices and a drop in mortgage availability pose the biggest risk to the economy.

Kate Barker made the claims as mortgage lending figures surprised analysts after advances increased by 11% last month to hit £26.5bn.

But despite this, she believes house prices will fall in the short-term relative to earnings.

In a speech to the North Staffordshire Chamber of Commerce, she said: "The risk I believe to be of most concern is around the interplay between the property market and the financial sector resulting from the credit turmoil.

"There are clear signs of a marked weakening in both the commercial and residential property markets."

She also warned that if the present difficulties in wholesale money markets continue for lenders, there could be a fall in the availability of home loans during 2008.

She said: "In this case the mortgage market could become less competitive and more expensive, feeding back into a decline in the housing market, somewhat lower consumer spending, and also into lenders' balance sheets, reducing lending capacity further."

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