Feb. 18 (Bloomberg) -- Bank of England policy makers unanimously agreed to ask the government for authority to create money in an effort to kick start the economy, saying further interest rate cuts may hurt the profitability of banks.
The Monetary Policy Committee, led by Governor Mervyn King, voted 8-1 to cut the main rate to 1 percent, the lowest since the central bank was founded in 1694, minutes of the Feb. 5 decision published in London today show. David Blanchflower, argued for a deeper reduction so rates go as low as possible “without delay.”
The minutes suggest rates cuts are becoming less potent, pushing the central bank to use unprecedented means to revive the economy from its worst slump since 1980. King and Chancellor of the Exchequer Alistair Darling will exchange letters about the next steps within a few days, a spokesman for the Treasury said.
“To the extent that further cuts in bank rate could not inject sufficient stimulus, the committee would need to use alternative policy measures,” the minutes said. “Therefore the committee unanimously agree that the governor should write on its behalf to the chancellor to seek authority to conduct purchases of government and other securities, financed by the creation of central bank money.”
The pound fell after the report and traded at $1.4167 as of 10:20 a.m. in London.
http://www.bloomberg.com/apps/news?pid=20601068&sid=a_YrfCU4wkN4&refer=home
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