Minutes of the September MPC meeting partially vindicate the recent dovish shift in my MPC-ometer. The vote changed from 1-7-1 in August (Besley seeking a 25 bp hike, Blanchflower a 25 bp cut) to 8-1 (Blanchflower voting for a 50 bp cut).

Taking into account the September vote and available data on the other inputs, the model suggests a knife-edge October decision. Further weakness in consumer and business surveys released in late September and early October – plausible in light of recent financial events – would tip the balance in favour of a cut.

Exchange rate developments will also be important. MPC members were concerned by the plunge in sterling during August but the effective index is currently 1.5% higher than at the time of the September meeting.

The MPC will wish to avoid the impression of cutting rates to rescue miscreant banks but current financial turmoil clearly has negative implications for credit supply and the wider economy.

Labour market figures also released today showed a shock 32,500 rise in claimant-count unemployment in August, boosting fears that the economy is already in recession. However, my research suggests that job vacancies are a better coincident indicator than unemployment. The 8% drop over the last three months is consistent with stagnant rather than contracting GDP – see chart.