Governor Mervyn King briefed the other eight policymakers about the discussions of a coordinated move with other central banks including the U.S. Federal Reserve and European Central Bank and then invited them to decide on whether to join the action.

Most analysts expect a further cut in interest rates next month. But the minutes stressed it was unclear how far and fast borrowing costs would ultimately need to fall, and sterling recovered ground after the minutes were released.

"There are no clues either from the minutes or from Mervyn King's speech last night on the size of any subsequent easing," said Philip Shaw, chief economist at Investec.

After hitting a 5-year low of $1.6203 earlier in the global session, sterling cut losses to last stand at $1.6387, down 1.77 percent on the day.

Banks should reduce standard variable mortgage rates when base rates are cut, Europe's largest consumer group says. Which? called for "a quid pro quo" between banks and consumers as a survey showed recent interest rate cuts were passed on by just 25% of lenders. Moneyfacts found that banks including Northern Rock had not passed on the full 0.5% base rate cut to UK lenders.

The British Bankers' Association told the BBC: "There is scope to reduce rates to customers."

The MPC judged that the financial market turmoil and economic data over the month pointed to a sharp deterioration in the prospects for the economy and had shifted the risks to the inflation outlook decisively to the downside.

"All these developments pointed to the need for a relaxation in monetary policy. In the current financial market turbulence, the reduction in Bank Rate that would ultimately be required to meet the inflation target was very difficult to gauge," the minutes said.

Moneyfacts' mortgage expert Darren Cook said: "Some lenders have announced a reduction in their SVR and have reduced their rate by the full amount. However, a growing number have chosen not to do this and only passed on a proportion of the cut or none at all."

Most analysts expect the central bank to cut rates again in November due to the slowdown in the economy and the scale of the problems in the financial sector since the collapse of U.S. investment bank Lehman Brothers in September.

King admitted in a speech on Tuesday night that the economy was probably entering recession. But he also pointed to the need to balance the risk of inflation falling below the 2 percent target against that of the current high rate becoming embedded in people's expectations. 

A spokesman told the BBC: "As liquidity returns, because of recent government and central bank actions, banks are again able to lend to each other and at lower rates. Early signs are that BBA Libor rates - the benchmark of real interest rates - are beginning to come down."