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Bank voted 8-1 to reduce UK rates Bank voted 8-1 to reduce UK rates
(about 4 hours later)
The Bank of England's rate-setting committee voted 8-1 to cut interest rates to 1% from 1.5% in February, minutes of the meeting have revealed.The Bank of England's rate-setting committee voted 8-1 to cut interest rates to 1% from 1.5% in February, minutes of the meeting have revealed.
It was the fifth time since October that the Bank's Monetary Policy Committee (MPC) has trimmed rates.It was the fifth time since October that the Bank's Monetary Policy Committee (MPC) has trimmed rates.
The one dissenting vote came from MPC member David Blanchflower, who wanted rates cut more sharply to 0.5%.The one dissenting vote came from MPC member David Blanchflower, who wanted rates cut more sharply to 0.5%.
The MPC voted 9-0 to seek government approval for measures aimed at raising the supply of money in the economy.The MPC voted 9-0 to seek government approval for measures aimed at raising the supply of money in the economy.
At the top you use the following:
See graph of interest rate decisions
The aim of this process, which is technically known as quantitative easing, is to help increase the level of funds in the banking system, thereby making it easier for the commercial banks to increase lending.The aim of this process, which is technically known as quantitative easing, is to help increase the level of funds in the banking system, thereby making it easier for the commercial banks to increase lending.
'Great uncertainty''Great uncertainty'
In the released minutes, the Bank hinted that increased quantitative easing was necessary, as cutting rates alone may now not be enough to help the economy out of recession.In the released minutes, the Bank hinted that increased quantitative easing was necessary, as cutting rates alone may now not be enough to help the economy out of recession.
WHAT IS QUANTATIVE EASING? Traditional 'QE' involves buying just government securities, or gilts. However, the MPC will be looking to buy high quality corporate securities as well Stephanie Flanders, BBC economics editor Read Stephanie's blog on 'QE'
"To the extent that further cuts in bank rate could not inject sufficient stimulus, the committee would need to use alternative policy instruments," the minutes said."To the extent that further cuts in bank rate could not inject sufficient stimulus, the committee would need to use alternative policy instruments," the minutes said.
"There was a great deal of uncertainty about what would happen to banks' and building societies' ability and willingness to lend at low levels of interest rates.""There was a great deal of uncertainty about what would happen to banks' and building societies' ability and willingness to lend at low levels of interest rates."
Its admission comes after a number of business groups, including the Federation of Small Businesses, said the recent rate cuts were not working, as the commercial banks were still reluctant to lend.Its admission comes after a number of business groups, including the Federation of Small Businesses, said the recent rate cuts were not working, as the commercial banks were still reluctant to lend.
"The vote on rates was in line with expectations but the most important aspect of today's minutes was the unanimous vote to write to the Chancellor to seek his consent to implement quantitative easing," said Andrew Goodwin, senior economic advisor to the Ernst & Young Item Club."The vote on rates was in line with expectations but the most important aspect of today's minutes was the unanimous vote to write to the Chancellor to seek his consent to implement quantitative easing," said Andrew Goodwin, senior economic advisor to the Ernst & Young Item Club.
"Item believes that it is crucial that the Bank be allowed to swiftly and boldly implement this policy.""Item believes that it is crucial that the Bank be allowed to swiftly and boldly implement this policy."
The British Chambers of Commerce (BCC) said the MBC must now be bold.The British Chambers of Commerce (BCC) said the MBC must now be bold.
"There is a critical need for aggressively pursuing quantitative and credit easing," said BCC chief economist David Kern."There is a critical need for aggressively pursuing quantitative and credit easing," said BCC chief economist David Kern.
"Businesses must be reassured that the MPC and the Bank will move in that direction.""Businesses must be reassured that the MPC and the Bank will move in that direction."
Official data released on Tuesday showed that UK consumer price inflation stood at 3% in January, falling from 3.1% in December, but still above the government's 2% target.Official data released on Tuesday showed that UK consumer price inflation stood at 3% in January, falling from 3.1% in December, but still above the government's 2% target.
The UK economy contracted by 0.6% between July and September, and by 1.5% from October to December.The UK economy contracted by 0.6% between July and September, and by 1.5% from October to December.
Meanwhile, unemployment rose to 1.97 million in the three months to December 2008 - the highest level since 1997.Meanwhile, unemployment rose to 1.97 million in the three months to December 2008 - the highest level since 1997.
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