The Bank of England's monetary policy committee (MPC) unanimously voted to cut interest rates by 1.5 per cent earlier this month where a 2.5 per cent cut was discussed.
The surprise cut to three per cent caught the markets unawares but inflation figures released yesterday and seen by the MPC early showed inflation has now reached its peak.
The minutes of the meeting also show the MPC even discussed the possibility of a 2.5 per cent cut to two per cent.
The Bank hinted further cuts could come depending on how the economy reacts to the cut and possible tax cuts in Alistair Darling's pre-Budget report next week.
Holding back a larger cut was the effect of a falling pound on the cost of imports which could push up inflation.
"Too large a surprise could pose upside risks to the inflation target if the resulting depreciation of sterling was excessive," the minutes stated.
Attention now turns to whether the Bank of England will cut interest rates when it sets rates again on December 4th.
Speaking last night MPC member Tim Besley highlighted how inflation had dropped and defended the Bank for not cutting rates earlier.
"The threat of persistent inflation led the MPC to be reluctant to cut Bank Rate before clear evidence that inflationary forces were moderating," he said.
"The oil futures curve, which was used in the August Inflation Report projections, suggested that oil would remain at $120 per barrel for the reminder of the year. The current oil price is now below $55 dollars per barrel."
He also explained the 1.5 per cent cut should not have been such as shock but analysts were focussing on the personalities of MPC members and past small decisions rather than the needs of the economy.
"So why did the pundits and commentators fail to predict the behaviour of the MPC in November? After all, the data that we based our projections on are in the public domain," Mr Besley said.
"One possibility is the obsession with describing the composition of MPC in terms of personalities and labels like hawk and dove. As I am sure you all appreciate, these constitute a distraction from what really matters the nature of the economic arguments and how they shape the outlook for inflation.
"It also seems likely that too much weight was put on the past decisions of the MPC which has generally moved Bank Rate in small steps. However, this was a reflection of the pattern of news in the data rather than a binding convention."