Three-month sterling LIBOR eased to 5.95% at its fixing yesterday but remains detached from Bank rate at 5.25%. As well as the appropriate level of official rates, the MPC ought to discuss ways of closing this gap at its meeting this week.

The Bank of England’s money market operations are no longer a technical adjunct of the policy process but have become central to achieving the MPC’s aims. Mervyn King has promised new facilities to ease banks' longer-term funding difficulties. The form and scope of such measures should be discussed and decided upon by the full MPC, not a select group of Bank officials. To emphasise its increased focus on market rates, the MPC could communicate its plans for narrowing LIBOR / Bank rate spreads along with its rate decision at midday on Thursday.

My MPC-ometer suggested financial market pressures warranted a cut in Bank rate last month. It has stuck to its guns this month, forecasting a 6-3 vote for a quarter-point ease. Interestingly, the Sunday Times Shadow MPC also voted 6-3 for a reduction, with one member seeking a half-point move.