MPC split on decision to cut interest rates

  • Story by: Sharon Flaherty
  • Magazine: FTAdviser
  • Published Wednesday , April 23, 2008

The Bank of England’s Monetary Policy Committee (MPC) was split over its decision to cut interest rates to 5 per cent earlier this month.

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The MPC opted to cut interest rates by 25 basis points this month (April) to 5 per cent after dithering on the matter since February. (See previous story.)

It has emerged that six members of the committee voted in favour of cutting interest rates and three members voted against, with Tim Besley and Andrew Sentence preferring to hold the Base Rate at 5.25 per cent.

One member, however, David Blanchflower, wanted an immediate reduction of 50 basis points to 4.75 per cent.

"A reduction in the Base Rate now would reduce the tail risk of an unexpectedly sharp slowdown in demand later in the year, which, if it materialised, might require a more vigorous policy response in order to hit the inflation target," MPC members said.

It had been thought that there was a chance that consumer price index (CPI) inflation could reach 3 per cent later in 2008, above the governments target level if around 2.5 per cent. (See previous story.)



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