MPC minutes show all members backed recent cut

Following the February Monetary Policy Committee meeting the Bank of England decided to cut interest rates by 0.25% for the second time in a few months, having already cut the base rate by 0.25% in early December 2007, which was the first rate cut in over two years. The recent minutes released from the February meeting have shown that on this occasion all of the Monetary Policy Committee members voted in favour of an interest rate cut, with one member voting for a 0.5% cut.

The base rate was cut from 5.5% to 5.25% in February amongst concerns amidst committee members that the tighter lending conditions in place in the UK meant that interest rates were still restrictive. The minutes read: “Interest rates were probably still bearing down on demand partly because of higher market spreads meant that the level of Bank Rate consistent with any given monetary stance was lower than it had been before spreads had widened.”

The minutes went on to state: “The Committee needed to balance the risk that a sharp slowing in activity would pull inflation below the target in the medium-term against the risk that elevated inflation expectations would keep inflation above target.”

Many experts have predicted that interest rates will fall hard and fast this year, but some officials have stated that they are unlikely to fall as fast or by as much as some have predicted. One economist stated: “It seems that the MPC is ready to do more in terms of monetary easing but at this stage it seems the message they are trying to send is that they are not prepared to do as much as the market was hoping.”

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