Bank cuts interest rate to an all-time low

In a funny sort of way, the size of today's cut didn't matter that much.

The link between base rate and the actual rates paid to savers and paid by borrowers has been eroded as official rates have plumbed depths not seen in centuries.

The markets are already assuming rock-bottom interest rates and have been turning their attention to more drastic tools the authorities may soon need to wield to brake the economic freefall and to prise banks out of their current funk.

In the event the Bank of England opted for a half point reduction to 1.5 per cent.

It won't necessary please the no-change brigade, who argue that in these times the conventional levers of monetary policy don't work any more. By cutting again today, there is less pressure on Alistair Darling to get to the root of the problem by offering fresh guarantees to the banks.

It won't please policy-makers who believe the sooner we get to zero interest rates the better. With companies running scared and jobs being shed in ever greater quantities, any delay could be seen as folly. And the sooner we get to zero, the sooner the Chancellor can wheel out his new policy toy - quantitative easing, the pumping of additional money into the economy.

It won't please savers, who are already being bruised by the thinnest returns in decades. And it's not clear that borrowers will benefit much, with the exception of those on tracker deals, most of whom will automatically qualify for lower mortgage bills.

Policymakers can wiggle the levers as much as they like. They hyperactivity may slightly modify the depth of the recession or its length. But they can't do much to numb the pain. It will take time and a lengthy purging before the animal spirits of consumers, business leaders and investors are likely to be reignited.

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