Bank reaction too slow

We have learned to expect the European Central Bank (ECB) to be the laggard in responding to world economic events with interest rate moves, but today's 0.25% cut by the Bank of England made even Wim Duisenberg, the ECB's enigmatic president, look nimble.

The US Federal Reserve took preemptive action with a confidence-boosting 0.5% cut before Wall Street resumed trading yesterday. Fed chairman Alan Greenspan's lead was followed by the monetary authorities in Canada, Switzerland, Sweden and late in the afternoon by the ECB.

The ECB acted despite earlier comments by Mr Duisenberg that it was too early to assess the impact of last week's events on world growth. This morning, the Bank of Japan followed suit - another cut, another contribution to the concerted attempt by central banks to prevent the world economy sliding into recession.

The only surprise about today's rate cut by the Bank of England, after an emergency meeting of the nine-member monetary policy committee (MPC), was its relative tardiness, and that it shaved only 0.25% off rates, refusing to join the transatlantic chorus of half-percent cuts. Steady Eddie - the Bank's governor, Sir Edward George - looked rather more steady than usual; perhaps even staid.

One piece of news this morning helps to explain why the Bank feels justified in standing out from its cousins around the world. Inflation in the UK took a sudden upward jump last month, rising to an annual rate of 2.6%. Crucially, this puts it above the MPC's inflation target, for the first time in over two years.

Although analysts pointed to the contribution of volatile factors such as petrol and food prices, it will probably have provoked fierce debate within the genteel confines of the Bank's Threadneedle Street headquarters about how much breathing space the Bank has to cut rates without provoking damaging inflationary pressures.

If last week's events turn out not to have quite the devastating effects on consumer confidence as other central banks seem to believe, the Bank must fear the UK will emerge from the crisis with a damaging inflationary spiral on its hands. With a 0.25% cut - which may have been a compromise between doves arguing for a larger cut, and hawks believing no cut at all was necessary - they have left themselves the time to wait and see.