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BOE VOTED 9-0 FOR 150-BPS RATE CUT, CONSIDERED 200 BPS

Posted:19/11/2008 10:06 by Stephanie Sprague
Bank of England (BOE) policy makers voted 9-0 to cut the UK base rate by 150 basis points, and even considered a deeper cut in excess of two percentage points to keep the inflation rate from falling below its target in the medium term, minutes of their November 6th rmeeting showed today. The BOE's Monetary Policy Committee (MPC) argued a strong case for an immediate reduction of at least 100 basis points, but believed problems in the banking sector had probably reduced the affect of rate cuts on economic activity. This "reinforced the need for a subtantial reduction in the bank rate." According to the minutes, projections in its recent quarterly inflation report implied that "a very significant reduction in Bank Rate -- possibly in excess of 200 basis points -- might be required in order to meet the inflation target in the medium term." The MPC decided against such a move due to the government's fiscal intentions of bringing forward spending commitments, uncertainty about how the economy would respond to global central banks' infusion of liquidity and concerns of unduly surprising the financial markets. "Too large a surprise could pose upside risks to the inflation target if the resulting depreciation of sterling was excessive," the minutes said. click here to return to the top of the page
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