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BoE Voted 7-2 for Steady Rates in March

Two of the nine Bank of England policymakers opposed this month's decision to keep interest rates at 5.25 percent, preferring an immediate quarter-point cut to shore up the economy in the face of a global downturn.

Minutes of the March 5 and 6 meeting published on Wednesday showed BoE Deputy Governor responsible for financial stability John Gieve joined arch-dove David Blanchflower in calling for a pre-emptive rate reduction.

Markets had predicted an 8-1 vote and Gieve's call for a cut is likely to increase expectations of further reductions, particularly given his remit.

The rest of the MPC, however, were concerned that following February's rate cut so quickly with another cut would give the wrong signal to the market -- that policymakers were more focused on growth than inflation.

"Back-to-back reductions might lead observers to think that the Committee was focusing on downside risks to demand at the expense of the medium-term outlook for inflation," the minutes said.

"That in turn could lead to an exaggerated response of the market yield curve to a rate reduction."

Financial markets are pricing in as many as four quarter-point interest rate cuts in Britain this year but many MPC members are still clearly worried about inflation, already running well above the central bank's target.

They argued that upward pressures on inflation could spread beyond the energy and food sectors and were being compounded by a greater than expected fall in sterling.

MPC members said that both downside risks to growth and upside risks to prices appeared to have risen over the last month but they were divided about whether that had affected the balance significantly.