LONDON - All nine members of the Bank of England's Monetary Policy Committee voted to cut interest rates by a quarter-point to 5.5 percent in December and even discussed whether slowing growth meant a bigger reduction might be needed.
Minutes of the MPC's December 5 and 6 meeting published on Wednesday showed policymakers discussed a range of options including keeping rates steady because of inflation pressures and a bigger cut than the quarter-point they settled for.
Economists had predicted a 6-3 vote and the unanimous vote sent sterling down and government bonds up as financial markets ratcheted up expectations of another rate cut soon.
"The worsening financial market turmoil, and the consequent tightening of credit conditions, had increased the downside risks to activity and inflation in the medium-term," the minutes said.
"Signs of slowing growth were already apparent. That suggested a substantial loosening in policy might be needed. However, a large reduction in Bank Rate now would increase the upside risk to inflation."
This was the first time the MPC had voted unanimously to lower rates since November 2001 when central banks all over the world were easing policy in the aftermath of the September 11 attacks on the United States.
The MPC said evidence of tightening credit on the rest of the economy was so far patchy but the housing market slowdown had become more pronounced than expected.
"On balance, the Committee thought that the downside risks to the economy and inflation in the medium-term from the deterioration in financial market conditions outweighed the potential upside risks to inflation from short-run cost pressures," the minutes said.
Policymakers judged that at 5.75 percent, policy had already been restrictive and the expected slowdown would dampen inflationary pressures, putting them in a good position to act "pre-emptively" without losing inflation-fighting credibility.
