London, Feb. 25 (Bloomberg) -- Slower growth in the world economy, the threat of war in Iraq and a forecast that U.K. inflation will fall prompted the Bank of England to cut interest rates this month, policy makers said. ``The most obvious risk that was crystallizing was slower growth in the global economy,'' the bank's governor, Sir Edward George, said in testimony to the U.K. parliament's Treasury Select Committee. ``That was aggravating the external weakness. And we were having the impact of the Iraq uncertainties.'' The Bank of England unexpectedly lowered its benchmark lending rate by a quarter point on Feb. 6 to 3.75 percent, the lowest in almost half a century. The central bank cut its forecast for economic growth this year to about 2.5 percent from 3.1 percent predicted in November.
George said policy makers considered the risk of boosting consumer borrowing further and stoking the housing market. ``We had to be careful that we didn't exacerbate unnecessarily the boom in house prices and the strength of consumer demand,'' George said, though policy makers judged that strength was ``beginning to moderate.'' Mervyn King, the bank's deputy governor and George's designated successor, said he voted for lower interest rates because ``inflation was headed down.'' Policy makers predicted in the February inflation report that inflation would climb to around 3 percent this year, then ease to the 2.5 percent target by the end of next year. They cited ``temporary influences'' such as housing and oil costs that would ``unwind.'' //www.quote.bloomberg.com