BoE's Gieve and Blanchflower vote for rate cut
Two members of the Bank of England's Monetary Policy Committee voted in favour of cutting interest rates again at the March meeting, although they were outvoted by the other seven.
Deputy Governor John Gieve, responsible for financial stability, and arch-dove David Blanchflower, both wanted a quarter point reduction in borrowing costs to 5% in order to soften the blow of the credit crunch.
Minutes from the March 5-6 meeting, published this morning, revealed that most policymakers were concerned about the impact another drop in rates would have on inflation.
A report yesterday showed annual CPI inflation running at 2.5% in February, a nine-month high, and the fifth month in a row that it's been above the government's 2% target.
Ratesetters thought that lowering borrowing costs again, having dropped them by a quarter percent in both December and February, would send out the wrong signal to financial markets.
(Article continues below)Advertisement
"Back-to-back reductions might lead observers to think that the committee was focusing on downside risks to demand at the expense of the medium-term outlook for inflation," read the minutes.
"That in turn could lead to an exaggerated response of the market yield curve to a rate reduction."
But experts still think the Bank will announce at least three further rate cuts this year in an effort to combat the credit crunch.
Mortgage lender HBOS was sharply lower Wednesday as it was forced to deny market rumours that it has had to request additional funding from the Bank of England.
