Wednesday January 21, 10:33 AM
Bank of England 'voted 8-1 to slash rates'
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LONDON (AFP) - Bank of England policymakers voted 8-1 to slash interest rates this month by half a percentage point to the lowest point since the late 17th century, minutes of their meeting showed on Wednesday.
The BoE's nine-member monetary policy committee had on January 8 cut its key lending rate from 2.0 percent to the lowest level since formation of the central bank in 1694.
In its minutes published on Wednesday, the bank said that "the news on the month had left the balance of risks to output and inflation, relative to the target, to the downside."
One policymaker, David Blanchflower, voted in favour of cutting rates by 100 basis points after arguing that it was "becoming increasingly probable that there would be a deep and prolonged recession."
The Bank (NASDAQ: TBHS - news) of England's main task is to keep inflation at the British government's set target of 2.0 percent.
"Together with the effect of declines in commodity prices and subdued demand, it was likely that CPI (NYSE: CPY - news) inflation would fall towards, and possibly below, the 2.0 percent target during the first half of 2009," the minutes read.
British 12-month inflation dived in December from the previous month due to a tax cut on goods and services, falling energy prices and heavy pre-Christmas discounting, official data had showed Tuesday.
Consumer Prices Index (CPI) annual inflation sank to 3.1 percent in December, the lowest level since April 2008, from 4.1 percent in November.
The government had cut the rate of value-added tax (VAT) on goods and services in December to 15 percent from 17.5 percent in a bid to boost the struggling economy and prevent it sliding into recession.
"Looking further ahead, CPI was likely to be volatile in response to the effects of the VAT change on the twelve-month rate," the minutes added.
Meanwhile this Friday, recession was likely to become official in Britain, with data expected to show that the economy contracted for a second straight quarter in the final three months of 2008.
The technical definition of a recession is two successive quarters of negative economic growth.
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