Is the Bank bonkers not to cut rates?

Remember the date - November 2001 - the last time the Bank of England cut base interest rates by anything more than 0.25%

Since April - nothing, save for increasingly frequent attempts to inject fresh liquidity into the banking system.

This Thursday the Monetary Policy Committee makes its October interest rate decision and there is growing pressure for a sizeable rate cut because of the darkness descending on the real economy. With consumer price inflation stubbornly twice the level of the official target and with sterling falling to its lowest level for sixteen years against the US dollar, the MPC might have reason to retain their caution in moving on base rates. Indeed LIBOR is still more than 120 basis points above the base rate. Will an interest rate cut actually do much good to bolster confidence and have an impact on coprorate output, investment and employment decisions.

A 25 basis point change would be like pissing into a very strong headwind. The Bank’s reluctance to move on interest rates becomes more worrying by the day as the wider economic consequences of the fall out from the credit crunch and banking crisis become ever-clearer. Indeed if the Bank does not move on rates this week they will face a media backlash and they risk losing much of the goodwill and support accumulated since their independence eleven and a half years ago.

But 25 basis points is not enough - a rate cut of at least 50 basis points is the minimum needed as this crisis engulfs us all. Indeed it wouldn’t surprise me to see a coordinated interest rate reduction from the BoE, ECB and the Fed especially if the fear and contagion continues to spread into the western European banking system.

This Channel 4 feature looks at the UK economic slowdown including the pressures facing retailers such as Marks and Spencer and the impact of the collapse in property lending and house prices.