Bank of England voted 6-3 to cut interest rates: minutes
LONDON (AFP) — Bank of England policymakers voted 6-3 to cut interest rates by a quarter-point to 5.00 percent earlier this month, minutes of their meeting showed on Wednesday.
The BoE's nine-member Monetary Policy Committee (MPC) trimmed its key lending rate at the meeting on April 9-10 amid growing fears over the impact of the global credit crisis.
Minutes revealed on Wednesday that six MPC members, including BoE governor Mervyn King, voted for a quarter-point reduction in order to keep inflation in an appropriate range in the longer term.
Member David Blanchflower called for a steeper half-point cut, while Tim Besley and Andrew Sentance called for no change in the repo rate -- at which the BoE lends to commercial banks.
"In order to avoid ... undershooting the inflation target in the medium term, it was necessary to offset, partly but not wholly, the current and prospective downward shift in demand arising from the deterioration in global credit conditions and its consequences," the majority argued.
"A reduction in bank rate now would also reduce the 'tail' risk of an unexpectedly sharp slowdown in demand later in the year."
The minutes added: "For the majority of members, the outlook and the balance of risks around the Committee's central projection for inflation warranted a reduction in Bank Rate of 25 basis points at this meeting."
April's rate cut followed similar reductions in December and February. The decision took short-term borrowing costs to the lowest level since January 2007 and came amid concerns over Britain's slowing housing market.
The Bank of England's main task is to keep 12-month inflation close to a government-set target of 2.0 percent.
It jumped to 2.5 percent in February from 2.2 percent in January, holding above target for a fifth month.
However, the BoE said earlier this month that it expected ongoing disruption in financial markets to prompt an economic slowdown which would pull inflation sharply below target in the medium term.
"There appears to be a split emerging between those members focusing very closely on the near-term inflation outlook, and those prepared to think more about the implications of the weakening activity outlook for inflation further ahead," noted Capital Economics analyst Jonathan Loynes.
"We continue to expect rates to fall at their recent pace of one cut every two months in the foreseeable future, with the next move coming in June.
"But the slower rates fall, the further they will eventually have to go to revive the economy."
