MPC mulled larger base rate drop

Members forecast that, given the significant probability of undershooting the inflation target in the medium term, a cut of at least 100 basis points was needed. The MPC eventually opted against a larger cut as the financial markets had already priced for a cut of 100 basis points, and anything larger may cause an excessive fall in the exchange rate and undermine confidence in the economy. "A cut of 100 basis points would mean that the level of Bank Rate would have been reduced from 5% to 2% in just eight weeks; given the uncertainty inherent in the transmission mechanism, it was diffic...