The MPC delivered the full-point cut expected by the market but the accompanying statement suggests its focus is shifting towards additional Fed-style interventions to improve money and credit flows. This would be a welcome if belated change and could imply Bank rate has reached a temporary floor at 2%.

With market conditions still “extremely difficult” despite the government’s financial support package, “the MPC noted that it was unlikely that a normal volume of lending would be restored without further measures”. Hopefully, this means the Bank of England emulating recent Fed actions designed to improve credit availability and boost the money supply rather than forcing banks to expand lending under threat of nationalisation.

The statement justified the rate cut with reference to the below-target inflation forecast in the November Inflation Report, weak activity data and further falls in commodity prices. The recent plunge in sterling was downplayed, as was the substantially weaker fiscal position revealed by the Pre-Budget Report. Indeed, the statement claims that “the new fiscal plans are unlikely to have a significant effect on inflation” over the longer term, despite the risk of an explosive rise in government debt.