While this decision will be welcomed by many economic commentators and UK businesses, whose calls for rate cuts have been mounting to a crescendo over recent weeks, the MPC's action still represents something of a calculated risk.

As we noted last month, the MPC has adopted a "wait and see" approach of late. It held rates at 5% for six successive months while consumer prices index (CPI) inflation continued to rise, hitting 4.7% last month (subscription required).

However, it is widely expected that the latest inflation data - due to be published by ONS on Tuesday 14 October - will show that CPI remains on an upward path. Indeed, Bank of England governor Mervyn King has stated (subscription required) that he expects CPI to "peak soon at around 5%".

Today's cut - coming one day earlier than expected - suggests that the MPC has leapt into action in response to rapidly deteriorating consumer and business confidence and tightening monetary conditions, rather than because it expects a sudden and miraculous turnaround in inflation come next Tuesday.

Watch this space...

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