Just earlier this month, the Bank of England chose to cut interest rates from 4.25% to 4% as the central bank focuses on a “gradual and careful” approach to easing the monetary pressure. But not all decision-makers are happy about this.
Before the decision, many traders and economists had already expected the BOE to trim rates by 25 basis points at its latest monetary policy meeting. But these experts had something else to focus on – the amount of support for the decision among the bank’s policymakers.
Not contrary to most expectations, the MPC of nine members took part in a meticulous process. 5 members chose to trim the interest rates, but 4 others didn’t feel the same. The majority played the last role, leading to the “Bank Rate” being trimmed by 25 basis points.
MPC split on reducing or holding key interest rate
The pound rose 0.5% against the dollar after the announcement of the decision. In a statement, the Bank of England said the MPC “remains focused on squeezing out any existing or emerging persistent inflationary pressures.”
The aim to to return inflation through sustainable means to the 2% target in the medium term? Is it going to be feasible? Initially, the MPC had been split on reducing or holding the key interest rate. Four members voted to hold rates and four others voted in support of trimming.
But one policymaker voted for a larger 50-basis-point cut. Therefore, the members had to go for a second round of voting to reach a majority decision. Nonetheless, it is important that the bank not cut the rate too quickly or too much.
