LONDON (AP) — The Bank of England said yesterday it considered an even bigger rate cut than the 1.5 percentage point trim to a 53-year low of 3 percent it made earlier this month — catching markets offguard — to counter a sharp deterioration in the economic outlook and inflationary expectations.

The minutes of the meeting of the nine-member Monetary Policy Committee, which decided unanimously on the cut, hinted at further rate cuts as Britain heads into recession.

The committee said forecasts that inflation is likely to fall significantly in coming months had "implied that a very significant reduction in Bank Rate — possibly in excess of 200 basis points — might be required to meet the inflation target in the medium term".

Annualised inflation fell to 4.5 percent in October, from 5.2 percent in the previous month, the biggest monthly change since records began, and the central bank expects it to fall to just half the two percent target next year.

But policy makers decided that "too large a surprise" to markets could risk higher than targeted inflation if a larger cut resulted in an excessive depreciation of the pound. A weaker currency can worsen inflation by raising the price of imports.

They added that they wanted time to assess how the wider economy would respond to banking bailouts around the world and government spending plans.

Some members also believed there was an argument to leave "some of the required policy loosening to the months ahead to support confidence as the economy weakened," according to the minutes, a clear hint that more cuts are likely in the pipeline.

Capital Economics chief European economist Jonathan Loynes said the bank could cut rates by up to one percentage point at December's meeting, with borrowing costs falling below an all-time low of two percent to one percent or lower next year.

"It seems that they refrained from an even bigger cut only to avoid surprising the markets too much and to leave room for further cuts," said Loynes.

"They also wanted to see what would be in next week's pre-budget report, but we very much doubt any fiscal boost will be anywhere big enough to preclude the need for further deep rate cuts."

Analysts expect Treasury Chief Alistair Darling to flag up tax cuts of around £15 billion ($22.4 billion) in his pre-budget report to Parliament on Monday.

The monetary policy committee's minutes said that the "prospects for economic growth and inflation were judged to be unusually uncertain, reflecting the exceptional economic and financial factors affecting the outlook".