Members expect inflation to fall quickly
Adjusted broad money supply measures, which had been growing strongly as a precursor to the lending boom and subsequent inflation, were now declining. Members were extremely pessimistic about the medium-term prospects for the economy and expected inflation to fall quickly. Those who voted for the 0.5% cut had a bias to cut further in the future or wanted a bigger immediate cut in rates.
There was some dissent from the majority position and much concern about both the government’s fiscal position and current inflation. The Chairman, David B. Smith, advising caution in cutting rates further, commented: “By easing monetary policy at a time inflation was above target, accelerating, and had consistently proved higher than the Bank of England had anticipated, we were coming dangerously close to junking the inflation targeting framework without putting anything in its place.”
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