However, Sir Mervyn did not rule out such a move and left the door wide open for further monetary stimulus through the Bank's quantitative easing (QE) programme. He disputed any contention that QE was having a "diminishing effect".
The latest inflation projections from the Bank, published yesterday, signal scope for further monetary stimulus to boost the struggling UK economy, through further QE, a rate cut, or both.
The Bank projects a modest undershoot of the 2% inflation target even on the basis of market interest rate assumptions – which are that base rates will be cut by about a quarter-point in the fourth quarter and stay at around 0.25% until 2015 – and with the QE programme staying at £375 billion.
In yesterday's quarterly inflation report, the Bank has yet again slashed its growth forecasts. It now projects the UK economy will broadly stagnate over 2012 as a whole.
Chris Williamson, chief economist at financial information company Markit, noted the Bank had been projecting 2012 growth of about 2% only a year ago.
He said of the latest forecasts: "The central projection seems to indicate that the Bank no longer expects the economy to grow over this year as a whole, with the strong possibility of a modest contraction. Just a year ago, the central projection for 2012 was for growth of around 2%."
The Office for Budget Responsibility raised its 2012 growth forecast from 0.7% to an albeit still weak 0.8% at the time of Chancellor George Osborne's most recent Budget in March.
Figures since, from the Office for National Statistics, have revealed the UK economy has tumbled back into recession.
The OBR, which was set up by Mr Osborne to provide independent economic forecasting, had predicted growth of 2.8% this year at the time of the Chancellor's first Budget in June 2010.
QE is aimed at stimulating economic activity by boosting money supply through the purchase of Government and corporate bonds, funded by the issuance of central bank reserves. The QE programme was hiked by £50bn in July.
Sir Mervyn said: "I don't accept the premise ... that asset purchases are having a diminishing effect. I don't believe that. They create money in the economy and that can have an effect."
He added: "We've been very clearly focused on the need to ensure that we don't end up in a position that did occur in the 1930s, certainly in the United States, where broad money fell away sharply. We are putting enough money into the economy. That is the direct aim of the asset purchase scheme."
Minutes of the Bank's nine-strong Monetary Policy Committee, which is chaired by Sir Mervyn, have highlighted MPC members' intention to reconsider whether there is any merit in cutting UK base rates from their record low of 0.5%.
The minutes have signalled the issue could be revisited when the impact of the Bank of England and UK Government's £80 billion Funding for Lending scheme becomes clear. This scheme is aimed at boosting lending to households and businesses by providing banks with money at interest rates below those available in the markets.
On the issue of cutting rates further, Sir Mervyn said yesterday: "To some extent, it's really neither here nor there. Another quarter-point off Bank Rate is not going to make the difference (between) having a recovery and not having a recovery."
The MPC has voiced concerns that a cut in base rates from 0.5% "might squeeze some lenders' interest margins to such an extent that they became even less able to extend new credit".
However, setting out the view of MPC members, minutes of their July meeting say: "The impact of the FLS (Funding for Lending Scheme) and other policy initiatives might, in time, alter the committee's assessment of the effectiveness of such a rate reduction."
Sir Mervyn yesterday said cutting rates would "damage some financial institutions and would therefore be counter-productive, which is precisely why we haven't done it."
He added: "(At) the last meeting, we did discuss it but we concluded, at least for the time being, it would be more counter-productive than beneficial, which is why I don't think it is something that we would contemplate doing immediately."
Assuming UK base rates remained at 0.5% and the scale of QE at £375bn, the Bank is projecting that annual UK consumer prices index inflation would be between 1% and 1.5% on its chosen two-year time horizon.