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Minutes show that six members of the Committee (Governor Mervyn King, Rachel Lomax, John Gieve, Kate Barker, Charles Bean and Paul Tucker) voted in favour of a 0.25 per cent reduction to 5.0 per cent on 10 April.

Tim Besley and Andrew Sentance preferred to maintain Bank Rate at 5.25 per cent. David Blanchflower preferred an immediate reduction of 50 basis points to 4.75 per cent.

He argued that greater weight should be put on forward-looking survey indicators, which were generally signalling a marked slowdown in domestic activity.

Recent US experience showed how such indicators could provide an early warning that shocks to the financial and property sectors were being transmitted to the rest of the economy.

Recent developments in the UK labour market suggested that any slowdown in demand growth might well be reflected more in slower nominal pay growth than in quantity adjustments.

In the light of the outlook for demand and hence inflation in the medium term, Blanchflower believed that it was appropriate to look through the near-term increase in inflation, which was likely to be short-lived.

For some other members, no change in bank rate was necessary at this meeting.

Consumption and output had slowed but not yet by as much as expected at the time of the February inflation report.

Meanwhile, the past two months had seen a further inflationary impetus from higher oil prices and a weaker pound.

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.

There was a risk that a premature cut in bank rate might sustain higher inflation expectations by making it appear that the MPC was more focused on offsetting downside news about the housing market, domestic demand or output growth, rather than on hitting the inflation target in the medium term.

“It was likely that bank rate would need to be reduced at a measured pace, but recent economic news did not justify a reduction before all the implications of the data could be re-assessed in the next forecast round; the analysis could then be communicated more fully in the inflation report,” according to the minutes.

Related articles

• Bank of England grants City 0.25% cut
• Salary growth continues to slow
• IoD warns that UK GDP growth will fall
• CBI calls for interest rate cut
• Boards expect no private equity growth
• First quarter sees leap in failures
• S&P predicts UK housing correction

Related links 

• Bank of England
• Minutes of the meeting held on 9 and 10 April