The Bank of England made history by slashing interest rates to an all-time low of 1.5 per cent
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It is probably little comfort to Gordon Brown in his Downing Street bunker but this week's dire economic news could have been a lot worse. The global economy has gone badly wrong, caught between a massive credit crunch born of the US-induced banking crisis and a surge in inflation .
So given what is happening all around, this week's news is probably as good as could be expected. True, the Bank of England announced that inflation had surged to 3.8 per cent but Mervyn King had already warned us that this was going to happen. Indeed he said it will probably go through four per cent in the autumn. That is one forecast he seems to have got right.
Mervyn does not have to worry about getting elected of course, so he can afford to be philosophical. Gordon Brown does not have that option and it is politically hugely damaging that for the first time in 25 years food prices are rising by more than 10 per cent a year.
An economist would say "so what?" Food accounts for only 14 per cent of average UK household spending. It translates over 12 months into just 1.4 per cent on the inflation rate. But it is different for politicians.
These price rises hurt but they reflect the fact that we in the West are growing poorer relative to Asia. Food and fuel will eat a larger slice of our spending. But we have no right to feel this is unfair. It is the flipside to the cheap Chinese goods that made us feel prosperous in the late Nineties.
Another hopeful sign is that in spite of the credit squeeze and the fall in house prices there are not a lot of redundancies, suggesting core economic activity is holding up. It may even be that the bulk of unemployment in areas such as housebuilding will be felt by immigrant workers who are already beginning to return home.
It allows us to hope that the shakeout in house prices might not be as severe as predicted. Unemployment is the real killer here because it forces people to sell at any price when they can no longer afford the mortgage.
But if that is what lies beneath, it is not the current mood either in the country or the markets.
Yesterday saw another stock market plunge and distinct signs of panic in the banking sector - irrational really as the week saw a successful support operation for American mortgage companies Freddie Mac and Fannie May.
It underlines though how sentiment is everything. People think a glass is half full and the economy grows; they think it is half empty and it contracts. That's where political leadership can and should come in and make a difference. At the moment though that is not what we are getting. Government is part of the problem not the solution.
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