17 Dec

MPC in total agreement over rate cut

MPC in total agreement over rate cut

It has been revealed that all nine members of the Bank of England's monetary policy committee (MPC) supported the decision to cut the base rate from three per cent to two per cent this month.

The MPC stated that "many survey measures of inflation expectations for 2009 had fallen sharply since the previous MPC meeting", increasing the risk that the consumer prices index (CPI) rate would fall below its target.

One new factor the body noted was the VAT cut from 17.5 per cent to 15 per cent, which it predicted would have the effect of lowering the CPI rate by one per cent from what it would otherwise be during the next year.

Such sentiments may increase the likelihood of the MPC opting to cut the rate again soon, which may help lower the cost of mortgages.

Writing to the chancellor after the news that CPI had fallen to 4.1 per cent in November, the Bank's governor Mervyn King said there is a chance inflation could fall as low as one per cent in the near future.
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