It has been almost lost in the wave of support for the cut in rates by the Bank of England that there are about four or five savers for every mortgage borrower. The banks have come under fire for not passing on the cut in rate but they cannot pass on the cut in offical rates unless they also cut the cost of the raw material out of which they have to fund a mortgage: savers' deposits. ( Read more... )

We are still in the early stages of the downturn but we can - in a funny way - see more about the policy response to it than we can about its scale and shape. It is clear that there will be further cuts in interest rates and the PBR next Monday will give us an idea of scale the fiscal stimulus. This has to be done - and I have sketched some concerns about it in the column today.  But we are still very much flying blind about the scale of the problem. My main concern is that if too much ammunition is used up now there won't be much left if the downturn proves prolonged. At the moment the received wisdom is that recovery gets going in the second half of 2009. I am not sure it can really do so until the housing market turns and that may be further away. Brighter note: even the more gloomy forecasts suggest that the recession will not be much more serious than the earlier 1990s and hence not nearly as serious as either the 1970s or the early 1980s. We need a bit of such comfort right now.

The fall in the pound was given a new kick downwards by the Bank of England's Inflation Report, and is now as sharp was the decline after sterling was ejected from the ERM in 1992. It could be seen as a vote against the Bank and the Treasury - sterling not so trusted now as it was even six months ago - and it will be miserable for UK tourists abroad. But in 1992 it was Britain's "get out of jail" card, enabling it to establish the conditions for the  long boom -  from which the present government has benefited.  It don't do much for the reputation of the Major government, though, and that may hang over this one too.