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BLOOMBERG — In the first three-way split in two years, Bank of England policy makers differed as they lowered the main rate this month. David Blanchflower favored a bigger cut while Andrew Sentance and Timothy Besley wanted no change. All three are external members of the Bank of England’s interest rate-setting Monetary Policy Committee (MPC).

The majority of the nine-member MPC voted to cut the interest rate by a quarter-point to 5 percent “to offset, partly but not wholly, the current and prospective downward shift in demand arising from the deterioration in global credit conditions,” minutes of the April 10 2008 decision showed. According to Governor Mervyn King the central bank faces a “difficult balancing act” as it tries to reduce inflation at a time when mortgage market is frozen which in turn is aggravating the housing downturn. The vote split shows the disagreement on the panel about the pace of further interest-rate cuts after three since December.

Nick Kounis, an economist at Fortis Bank NV in Amsterdam and a former U.K. Treasury official said “The minutes suggest to us that eight of the nine members remained in favor of a gradual approach to policy easing, reflecting the negative outlook for inflation for this year,”.
According to him “The BOE’s next move will be a 25-basis point reduction in June.”

U.K. mortgage approvals saw the biggest drop since September 2007 when it fell fell 46 percent in March from a year earlier, the British Bankers’ Association said today. The Bank of England will publish quarterly economic forecasts on May 14 2008.