The pound fell yesterday after comments made by monetary policy committee (MPC) member David Blanchflower that the next interest rate move could be downwards.

 The markets started the day with the pound worth $1.88705, €1.48285 and 221.815 yen.

Professor Blanchflower, the only member of the MPC to vote against the August interest rate hike told an audience in Cardiff that he saw the UK labour market loosening.

He noted that immigration from new EU countries had brought down wage inflation and the threat of price inflation may not be as serious as previously believed.

Howard Archer, chief UK and European Economist, commenting on the speech, said: Professor Blanchflower's comments cemented his place as the most dovish member of the MPC.

He said: "It is clear that he leans towards the view that the eventual next move in interest rates should be down rather than up - although he made clear during the September MPC meeting that he thought it would be unwise to reverse August's interest rate hike until it was clear that the 2007 pay rounds were remaining moderate."

Mr Archer added that the odds currently remain in favour of an interest rate hike in November.

"With growth seemingly holding up well at the moment, consumer price inflation above-target and rising, and the housing market buoyant - and given its concerns that wage settlements could rise during the next pay round - the Bank of England seems very likely to deliver another precautionary 25 basis point interest rate hike in November."

Sterling also suffered as UK GDP figures were revised downwards by 0.1 per cent to 0.7 per cent for the second quarter of 2006.

Mr Archer said about the figures: "We believe that growth is likely to lose some momentum over the coming months as consumers continue to face significant headwinds and exports are limited by a slowdown in global growth.

"Expected slower growth over the coming months should help to contain inflationary pressures and enable the Bank of England to leave interest rates unchanged at 5.0% for an extended period following November's anticipated 25 basis point hike."

He added that he forecasted GDP growth at 2.6 per in 2006 and 2.5 per cent in 2007, below the respective Bank of England forecasts of 2.8 per cent and 3.1 per cent.