For this week’s interest rate decision, the only sensible thing to do is to abstain rather than to feed the belief that, in the present circumstances, a cut of 0.5 points or one percentage point will rescue the economy.

An interest rate cut would help to weaken sterling, but, given the sharp devaluation over the past year, some sort of stability would be more desirable.

The United States offers a good example of interest rate impotence. Rates were cut sharply, well ahead of the UK, but the economy is probably shrinking as rapidly as ours. The cause of the problem probably lies in the banking system. In typical banking crises governments put about 10 per cent of GDP into the banks as extra capital. We have put in about 2.5 per cent, despite a severe crisis. For banks to resume lending, they need some combination of a loan guarantee scheme and substantial extra capital – not a one percentage point interest rate cut.

Alternatively, but probably more sensibly in addition, the Bank of England and the Treasury can look at other ways of providing credit to businesses.

Conventional monetary policy works by intervening at the short end of the market. But there is no reason, except habit, why it should be limited in this way and, in the current state of affairs, it makes a great deal of sense for the Bank to intervene at the longer end of the market. So-called quantitative easing is not a different policy but just common sense – intervening at the points in the market where it can make a real difference.

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