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‘The Bank of England could have cut rates by 50-basis points... or even the full 100, and still it would have made little immediate difference to underlying monetary conditions,’ says The Independent’s Jeremy Warner about the interest rate cut on 10 April from 5.25% to 5%. ‘For all practical purposes, these remain tight as tight can be’, says Warner, ‘with credit and mortgages becoming both scarcer and dearer even as official interest rates fall.’ The Telegraph’s Roger Bootle concurs: ‘Even after today’s cut, official interest rates are probably still at a level that is acting as a brake on economic activity,’ he says.

Warner and Bootle highlight the Monetary Policy Committee’s failure to refer to the housing market in its statement. ‘The elephant sitting in the corner of the room is the housing market, which the MPC statement contrives not to mention at all,’ says Warner. ‘This is perhaps not surprising, for house prices have become the issue that dares not speak its name, among policy makers at least. Nobody knows how far they might fall, or what effect this will have on confidence and consumption.’ Bootle adds that there was no mention of the subject, ‘presumably for fear of being accused of targeting asset prices or undermining confidence further. Nonetheless it is becoming increasingly likely that house prices will fall significantly.’

Meanwhile, David Wighton of The Times points out that the Bank of England’s decision to resist calls for a half-point cut in interest rates does not mean it is ‘relatively sanguine’ about the prospects for the economy. On the contrary, says Wighton ‘the quarter-point cut suggests that it is very worried indeed. To cut rates at all, when the short-term outlook for inflation is so bad, implies a very gloomy view of economic growth.’

Bootle argues that interest rates still need to fall further. ‘The upshot is that interest rates need to come down considerably further,’ he says. ‘I expect that rates will fall to 4% by the end of this year and further to 3.5% in 2009. And even this won’t be enough to stop GDP growth from slowing to just 1% or so next year.’