LONDON (AFX) - The Bank of England's Monetary Policy Committee voted by eight to one to cut the repo rate by 25 basis points to 5.25 pct at its May 10 meeting, according to the meeting minutes released today.
The minutes showed that only external MPC member Sushil Wadhwani wanted a reduction of 50 basis points.
But the majority deemed that a larger cut than 25 basis points was not "necessary or prudent."
The majority argued that consumption growth remained "fairly strong", that a 50 basis point cut could damage confidence, that since the MPC's April meeting there had been little domestic news and the implication for the UK of international developments was not clear, and that a larger cut would only be warranted if inflation was stuck at around 2.0 pct, which it was not.
The majority preferred to "move in small steps cutting again if either domestic or international news were to justify that course." Most MPC members considered that output growth would be at or below trend "for a while" given the global slowdowns, that business confidence had "most probably fallen" and that slowing consumption growth and an increasing negative contribution to gross domestic product growth from net trade were expected to more than offset the effects of rising public spending.
"For these members, the news of the month was on balance in the direction of weaker growth and so warranted a further small cut in the bank's repo rate," the minutes said.
"For some of these members, not much, if any, downside news had been needed since the committee's April meeting to justify a further easing," the minutes added.
The MPC noted that the timiing of the June 7 election was "irrelevant" to its rate decision which it said would be as usual made on the basis of what was necesary to achieve the 2.5 pct inflation target.
The minutes said that with the economy set to grow at or close to trend, the labour market still tight and strong sterling's earlier dampening effects on inflation wearing off, "inflation was most likely to rise gradually over the coming two years or so."