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Lone voice called for 0.5% cut in base rate

The Bank of England monetary policy committee voted 6-2 to cut base rate this month, with one member wanting an immediate 0.5 per cent reduction rather than the 0.25 per cent cut that took placeMervyn King, Rachel Lomax, John Gieve, Kate Barker, Charles Bean and Paul Tucker voted for the 0.25 per cent cut to 5 per cent while Tim Besley and Andrew Sentence wanted rates to remain at 5.25 per cent and David Blanchflower wanted a 0.5 per cent cut.

The minutes of the meeting show that the majority of members considered the outlook and the balance of risks on the MPC’s central projection for inflation warranted a 0.25 per cent reduction. They said that such a cut would be consistent with market expectations of a gradual easing of bank rate and reduce the risk of a sharp slowdown in demand later in the year.

Blanchflower argued that a bigger reduction was req-uired due to the concern over a marked slowdown in domestic activity based on forward-looking surveys.

Besley and Sentence put the case for no reduction and said inflationary pressures from rising output costs were spreading beyond the energy and food sectors and there was a danger that higher inflation expectations would persist. They warned that a cut might sustain higher inflation expectations.

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