These are difficult days for the Bank of England. An institution that sets itself high standards and prides itself on its dignity and decorum is getting a battering.

Gordon Brown is making political hay out of the crisis but he is not carrying the Bank with him. For years central-bank independence was his proudest achievement as chancellor. Now I get people asking whether it was such a good idea after all.

At the stormiest press conference since independence, Bank governor Mervyn King and his colleagues were last week accused of being caught with their pants down as the financial crisis turned into an economic crisis. That is not an image I want to dwell on, or can imagine being put to Eddie George, King’s predecessor, but the point was clear. The Bank has lurched spectacularly in the space of three months in terms of its view on the economy and on interest rates. On the face of it, it was not just behind the curve but out of sight.

What is the Bank’s defence? The world, said King, has changed, the outlook has been transformed. After Lehman Brothers was allowed to fail in September by the American government, the global banking system came perilously close to collapse.

Many people accept these were world-changing events. Confidence was weak but dived further. The autumn has been the closest thing to a “falling off a cliff” moment we have seen in this cycle, with very sharp falls in activity. At the same time, oil and other commodities plunged.

It was not hard to find reasons for oil to fall, of which more another time, but the drop was sudden and savage. I don’t want to use that quote from Keynes again, which should be banned, but the facts changed and the Bank changed its mind.

Fair enough. Nobody could have predicted the recent events and nobody did. That explains King’s robustly unapologetic tone.

Incidentally, there is a case for re-examining the piecemeal moves preceding the banking rescue, including the terms of the Bradford & Bingley rescue/nationalisation, the strategy for Northern Rock and even the Lloyds TSB-HBOS merger.

I don’t have a particular problem with the last of these but the B&B rescue is imposing a severe burden on smaller lenders, which have to fund the Financial Services Compensation Scheme, and it makes little sense for Northern Rock to be running down its mortgage book aggressively.

So the past two months have changed things, and the Bank was right to cut rates more aggressively than anybody expected, or hoped. Many of the armchair generals who are now most critical of the Bank were attacking it very recently for not raising rates far enough to stop inflation rising.

I do not think, however, that the Bank should get away with it entirely. There is something to criticise and for me it is a tale of the past three Augusts.

In August 2006, the Bank’s monetary policy committee surprised markets by raising rates for the first time in two years. Before then, the MPC seemed comfortable to live with a rise in inflation due to higher global food and energy prices.

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