A rate cut was needed to offset the negative economic impact of the significant deterioration in credit markets over the last month. Rising inflation reflects surging commodity prices, over which the MPC has no influence. Wage settlements remain stable and are unlikely to pick up against the backdrop of a cooling labour market. The MPC’s failure to act today increases the risk of serious economic weakness and an eventual inflation undershoot.

The MPC-ometer was wrong this month. The last miss was in June last year, when a quarter-point rise was predicted. Subsequent minutes revealed a 5-4 split and rates moved as forecast a month later.