Could interest rates go even lower?

A reduction in the base rate from 0.5 per cent to 0.25 per cent is no longer unthinkable.

With just a month to go until his autumn statement, the latest set of growth forecasts make grim reading for George Osborne. Ernst and Young's Item club predicts that the economy will grow by just 0.9 per cent this year, well below the 1.4 per cent it predicted three months ago. It has also downgraded its 2012 growth forecast from 2.2 per cent to 1.5 per cent.

Peter Spencer, the body's chief economic adviser explains:

It's worse than we thought. The bright spots in our forecast three months ago - business investment and exports - have dimmed to a flicker as uncertainty around Greece and the stability of the eurozone increases.

Significantly, the club uses the same forecasting methods as the Office for Budget Responsibility (OBR), offering us a preview of the downward revisions the OBR will have to make when it publishes its new estimates on 29 November, the day of Osborne's statement. Lower growth, of course, means higher borrowing, so the OBR is also likely to revise its deficit forecasts upwards. The club predicts that unemployment will rise from 2.57m to 2.7m over the next 18 months, resulting in lower tax revenues and higher welfare payments.

In response, it calls for a cut in stamp duty for first-time buyers and a reduction in interest rates from their current record low of 0.5 per cent to 0.25 per cent. The Monetary Policy Committee (MPC) has held the base rate at 0.5 per cent since March 2009 but it's worth noting that the possibility of reducing it even further was discussed at the last Bank of England meeting. The most recent BoE minutes (from 7-8 September) noted that the MPC "revisited the earlier decision not to lower Bank Rate below 0.5 per cent".

A reduction to 0.25 per cent still seems unlikely but, given the parlous state of the British economy, I'd expect that the MPC is ruling nothing out. As Mervyn King said when he announced another round of quantitative easing, "When the world changes, we change our policy response".

George Eaton is political editor of the New Statesman.

Screengrab from Telegraph video
Show Hide image

The Telegraph’s bizarre list of 100 reasons to be happy about Brexit

“Old-fashioned light bulbs”, “crooked cucumbers”, and “new vocabulary”.

As the economy teeters on the verge of oblivion, and the Prime Minister grapples with steering the UK around a black hole of political turmoil, the Telegraph is making the best of a bad situation.

The paper has posted a video labelled “100 reasons to embrace Brexit”. Obviously the precise number is “zero”, but that didn’t stop it filling the blanks with some rather bizarre reasons, floating before the viewer to an inevitable Jerusalem soundtrack:

Cheap tennis balls

At last. Tennis balls are no longer reserved for the gilded eurocrat elite.

Keep paper licences

I can’t trust it unless I can get it wet so it disintegrates, or I can throw it in the bin by mistake, or lose it when I’m clearing out my filing cabinet. It’s only authentic that way.

New hangover cures

What?

Stronger vacuums

An end to the miserable years of desperately trying to hoover up dust by inhaling close to the carpet.

Old-fashioned light bulbs

I like my electricals filled with mercury and coated in lead paint, ideally.

No more EU elections

Because the democratic aspect of the European Union was something we never obsessed over in the run-up to the referendum.

End working time directive

At last, I don’t even have to go to the trouble of opting out of over-working! I will automatically be exploited!

Drop green targets

Most people don’t have time to worry about the future of our planet. Some don’t even know where their next tennis ball will come from.

No more wind farms

Renewable energy sources, infrastructure and investment – what a bore.

Blue passports

I like my personal identification how I like my rinse.

UK passport lane

Oh good, an unadulterated queue of British tourists. Just mind the vomit, beer spillage and flakes of sunburnt skin while you wait.

No fridge red tape

Free the fridge!

Pounds and ounces

Units of measurement are definitely top of voters’ priorities. Way above the economy, health service, and even a smidgen higher than equality of tennis ball access.

Straight bananas

Wait, what kind of bananas do Brexiteers want? Didn’t they want to protect bendy ones? Either way, this is as persistent a myth as the slapstick banana skin trope.

Crooked cucumbers

I don’t understand.

Small kiwi fruits

Fair enough. They were getting a bit above their station, weren’t they.

No EU flags in UK

They are a disgusting colour and design. An eyesore everywhere you look…in the uh zero places that fly them here.

Kent champagne

To celebrate Ukip cleaning up the east coast, right?

No olive oil bans

Finally, we can put our reliable, Mediterranean weather and multiple olive groves to proper use.

No clinical trials red tape

What is there to regulate?

No Turkey EU worries

True, we don’t have to worry. Because there is NO WAY AND NEVER WAS.

No kettle restrictions

Free the kettle! All kitchen appliances’ lives matter!

Less EU X-factor

What is this?

Ditto with BGT

I really don’t get this.

New vocabulary

Mainly racist slurs, right?

Keep our UN seat

Until that in/out UN referendum, of course.

No EU human rights laws

Yeah, got a bit fed up with my human rights tbh.

Herbal remedy boost

At last, a chance to be treated with medicine that doesn’t work.

Others will follow [picture of dominos]

Hooray! The economic collapse of countries surrounding us upon whose trade and labour we rely, one by one!

Better English team

Ah, because we can replace them with more qualified players under an Australian-style points-based system, you mean?

High-powered hairdryers

An end to the miserable years of desperately trying to dry my hair by yawning on it.

She would’ve wanted it [picture of Margaret Thatcher]

Well, I’m convinced.

I'm a mole, innit.