2008.12.1704:56:00UTC+00BoE Minutes: UK Policymakers United In December Rate Cut

Wednesday, the minutes of Bank of England's latest rate setting session showed that the policymaking body voted unanimously to reduce rates.

The minutes of the session held on December 3 and 4 revealed that the Monetary Policy Committee voted 9-0 to cut the bank rate by 1-percentage points to 2%. The rate cut brought interest rate to the level last seen in October 1939.

The minutes showed that the MPC had discussed whether a larger cut was warranted in view of the scale of the downside risks to inflation. However, policymakers argued that a cut bigger than 100 basis points, which was already price in by markets, could cause an excessive fall in the exchange rate.

Further, there was also a risk that an unexpectedly large cut could undermine confidence in the economy more widely, the minutes said.

If the BoE had opted to cut the rate by more than 100 basis points, it would have taken the bank rate below 2% for the first time since the UK central bank was established in 1694.

To alleviate the mounting pressures on economy, policymakers had unanimously voted to reduce its key interest rate by a massive 1.5 percentage points to 3% in November. It was the single largest cut since the central bank gained independence in 1997.

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