1.5% worth of humble pie?
My snap reaction to the Bank of England's 1.5% rate cut: when the CBI only asked for 1% and analysts were expecting 75 basis points?
a) It is a total victory for Blanchflower who told the press two months ago rates would have to come down to this at the very least
b) The depth of the expected recession is huge: when Mervyn King was still trying to justify 5% interest rates he thought there was a 10% danger that inflation could reach zero. Now that danger must be looming much larger - meaning the Bank thinks there is a big danger of a deflationary recession.
c) The inadequacy of the transmission mechanism: to achieve even a small cut in high street mortgage rates they have to do a hug`e cut in base rates
d) The UK policy framework is looking very creaky: Darling intervened to tell Mervyn he can now target the 2% on a longer timeframe but is it not byzantine that decisions about growth have to be taken through the prism of inflation? If we are now targeting growth and saying we want growth to return, how does it help to have to justify that with a whole series of 18 month prognoses about inflation?
e) I can't wait to read the minutes: why was the 18 month view of inflation so much worse today than it was on 8 October, when the financial world had virtually collapsed?
We'll be debating all this on Newsnight tonight. Chip in now.