The Bank of England’s monetary policy committee (MPC) was split this month on how much interest rates should drop.

Eight members voted for the half a point cut to 1.5 per cent, but maverick economist David Blanchflower pushed for a full point cut.

The minutes of the meeting revealed Mr Blanchflower argued “the risks from delaying further cuts were bigger than those from cutting too far”.

He also predicted unemployment to rise, especially for young workers, and reported no real improvement in financial markets.

Mr Blanchflower also claimed tax cuts and interest rate cuts so far were having limited effectiveness.

However, the majority view was that “a cut of 50 basis points could still have a significant effect on the income of many businesses and households”.

The MPC also found a larger cut or no cut would “damage confidence further in both financial markets and the real economy”.

Jonathan Loynes, UK economist at Capital Economics, said the minutes – along with the rise in UK unemployment to 1.92 million announced today – meant the prospects of an interest rate cut to zero per cent was possible.

“January’s MPC minutes and the latest labour market data do nothing to undermine the view that further significant monetary policy action is ahead, both in the form of lower interest rates and quantitative easing,” he said.

“With the news on the economy still deteriorating dramatically and price pressures fading fast, it seems very unlikely that the MPC’s job is done.

“Overall, then, we continue to expect another 50 basis point cut in rates in February, with rates then falling to – or very close to zero – in the second quarter.”

The door may now be open for the Bank of England to start quantitative easing – the process of printing new cash to buy assets and hopefully stimulate the economy.

Richard Snook, senior economist at the Centre for Economic and Business Research, following a speech by Bank governor Mervyn King last night, said: “[Mr] King has left the door wide open for the use of ‘unconventional’ measures to stimulate the ailing UK economy.

“With the base rate approaching zero, the prospect of Keynesian deflation is looming large and falling prices that push up real interest rates, choking potential for recovery. These ‘unconventional’ measures would involve the Bank of England purchasing assets from the banks and government and corporate sector – in effect printing money to stimulate demand and inflation in the economy.”

Alistair Darling on Monday established the mechanism by which the MPC could start quantitative easing – providing a £50 billion fund to buy assets funded from the sail of Treasury bonds.

He explained, though, with UK interest rates at 1.5 per cent, it would some time before secondary action was needed.

“Look, interest rates in this country, although low, are still 1.5 per cent, so we are not in the same position as the Americans,” the chancellor said.

“If we have a policy change then I will make the appropriate announcement.”