MPC takes out an insurance policy

For some in the City, the Bank of England's decision to cut interest rates yesterday was a high risk, even a reckless, move.

The economy looks pretty strong, the housing market is robust, pay settlements are nudging upwards, so cheaper money will simply lead to excess demand and higher inflation. Britain, quite simply, is not the United States.

But think back to the autumn of 1999. At that point, inflation in the UK was below the government's 2.5% target yet the Bank's monetary policy committee did not hang about. It believed that the strength of the economy would eventually lead to upward pressure on prices so it took pre-emptive action, not once but four times.

As a result, those who were quick to praise the Bank for being forward looking then should apply the same logic to yesterday's quarter-point reduction in rates. With the US economy looking weaker by the day, all the risks for the UK are on the downside.

Underlying inflation stands at 2% and is heading towards 1.5% over the next few months, so the Bank need have no fear that its easing of monetary policy puts the government's 2.5% inflation target in jeopardy.

Indeed, the real threat to the global economy is deflation not inflation, as Japan knows only too well. Since it was given operational control over interest rates in May 1997, the Bank has tended not to indulge in one-off moves. There was a progressive tightening of policy in 1997 and early 1998 followed by a steady easing in the aftermath of the Russian debt crisis in the summer of 1998.

Yesterday's decision may buck the trend, being merely an insurance policy against a US-induced recession. But the chances are that rates will be closer to 5% than 6% by the end of the year. And rightly so.

Gloves are off

The surgical gloves have come off at Toft Hall, the quaintly named head office of SSL International. The condoms-to-catheters health care business is based in the nouveau riche enclave of Knutsford, Cheshire, which is somehow appropriate for a company which is new to the billion-pound league.

It seems that directors want someone to take the blame for November's profits warning. Chief executive Iain Cater and chairman Stuart Wallis are the leading contenders, both commanding loyalty and dislike in equal measure.

Critics of Cater maintain that he pushed through two mergers too quickly - first, linking Seton to Scholl and then adding Durex condoms maker London International. Having grown the company from ?30m to ?1.7bn, he was unable to keep a grip on its distant subsidiaries.

His sympathisers point out that this is his first slip-up in 10 years, and that he had the right to expect advice and support from his more experienced non-executive colleagues. Wallis had previously run the health care business Fisons, and if anyone knows about stocking issues - the cause of SSL's difficulties - it is him. He contributed to the damage caused in November by dashing out of an analysts' meeting to catch a plane, and by giving the general impression that he was only peripherally involved.

Boardroom tensions have been simmering at SSL for two months, which cannot be healthy for a business going through a critical recovery period. It is time for shareholders to decide whether they want to ditch a young management team for its first serious slip-up, or throw out the one experienced City name on the board.

Shell suits

Everything has always been done with due decorum at Shell Tower, so yesterday no one was trying to steal the limelight from Sir Mark Moody-Stuart, now in his twilight months as chairman of the Anglo-Dutch oil firm. But there was a noticeable trial run for Phil Watts, his successor, who takes the reins in June.

Mr Watts fielded many of the questions and was ready to take more once Sir Mark had retired at the end of a results presentation to mark the group's $13.1bn (?9bn) record annual profits, up 85% on last time.

Preliminary results stories do not come much punchier than this, so Mr Watts was probably right to revel in the good times while they are here. However, even in a downturn he looks unlikely to wilt.

The chairman-designate is a blunt no-nonsense Midlander in contrast with the urbane and cultured Sir Mark. Mr Watts has been with Shell since the 1960s and has put much of the fire into the company's highly successful restructuring.

Asked whether we could expect to see any change of direction in the company under his chairmanship, he replied "no". Boring!, cried the audience. If being successful is boring then "I like boring things," came the reply. So be it.