The panel of economic experts of The Times has underlined the trickiness of the decision on interest rates facing the Bank of England today.

Although two thirds of the members of the Times panel called for a quarter-point cut, there were also votes for a half-point cut and for no change at all.

The first problem is one of balance. How to weigh the need to take action to ease the credit crunch against the Bank’s brief to control inflation.

But that is not all the Bank’s Monetary Policy Committee has to do. It also has to worry about the perception of its decision, which makes the calculation particularly slippery.

Sushil Wadhwani, a former member of the MPC, said that there was a case for a three-quarter point cut. But he ruled this out because it might spook the market.

Several members said that whatever decision the MPC reaches, it will make little short-term difference to the credit markets. The big worry at the moment is the restricted supply of credit, particularly as it feeds through into a rapidly drying-up mortgage market. And this is unlikely to be affected by changing official interest rates.

But Rupert Pennant-Rea, former Deputy Governor of the Bank, said it was vital for the Bank to be seen to be taking action, whether or not it actually made any difference.

The IMF provided more ammunition for the rate-cutters yesterday by trimming its UK growth forecast for this year from 1.8 per cent to 1.6 per cent, below the bottom end of the Chancellor’s 1.75 per cent to 2.25 per cent forecast. It said that the slowing economy provided room for further rate cuts.

One thing is certain. If the MPC gets it wrong today, it won’t be for lack of advice.

david.wighton@thetimes.co.uk

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