Three of the nine members on the Bank of England's Monetary Policy Committee (MPC) voted to lower in...
Three of the nine members on the Bank of England's Monetary Policy Committee (MPC) voted to lower interest rates by 25 basis points at the last meeting on 9-10 October, although the majority voted to retain the current 4% rate.
Minutes of the MPC meeting were released this morning.
Voting in favour of keeping the existing rate were Eddie George, governor, Mervyn King, deputy Governor responsible for monetary policy, Andrew Large, deputy governor responsible for financial security, Charles Bean, Marian Bell and Paul Tucker.
Voting for a cut were Christopher Allsopp, Kate Barker and Stephen Nickell.
The decision to retain current rates was supported by domestic demand, which the Committee reported as still 'quite resilient', and the view that the economy was growing close to potential.
"An interest rate reduction seemed likely at present predominantly to affect house prices, household borrowing and consumption, which were already increasing strongly". There are also concerns of an 'unsustainable increase in debt' which 'might subsequently unwind sharply'.
Other reasons to retain the current 4% rate centered around inflation, which is projected to continue to rise; the potential net effect on inflation on the changes to equity, house prices and the exchange rate; and the case for a reduction had diminished in the light of continued robust consumption.
Those supporting a reduction agued that domestic demand (though not total demand) had weakened more than expected during the second and third quarters. The global economy and the euro-zone were also weaker.
They argued that one of the reasons for not reducing rates in August or September was based on the estimation that the fall in equity prices and the rise of the sterling was temporary. Indeed, equity prices have continued to fall and the strength of sterling persisted.
They also raised concerns about increased downside risks. Without a rate reduction "domestic demand growth might fall faster than currently envisaged, leaving inflation below target for longer".
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