Bank of England monetary policy committee members voted 8-1 in favour of maintaining bank base rate in January.
Minutes from the MPC January meeting reveal that only David Blanchflower voted against maintaining rates, preferring a 0.25 per cent reduction.
The minutes say: “For most members, no change in bank rate was necessary this month. The short-run inflation outlook had worsened markedly. A second period during which inflation was significantly above target, so soon after the one in spring 2007, might be more likely to lead people to revise up their expectations of future inflation, particularly if the rise in inflation persisted for longer.”
Blanchflower argued that the outlook for UK-weighted global demand had materially worsened, especially in the US. He said there was little likelihood that wage-bargainers would seek higher awards if CPI inflation increased temporarily, jud-ging by the recent behaviour of pay awards.
He felt that a further cut in base rate was therefore warranted and would be consistent with financial market expectations.
But the majority of members felt movements in the yield curve and the depreciation of sterling had already provided some further monetary easing.
The minutes say: “Reductions in bank rate in two successive months might, given the current conjecture, encourage observers to think that the committee was focused more on stabilising demand than meeting the inflation target and so shift the yield curve down further.”