Bank of England to pay more attention to GDP and money growth

All nine members of the Bank's Monetary Policy Committee voted to cut interest rates to 0.5pc and pump £75bn of newly-created money directly into the economy at its meeting earlier this month, according to the latest minutes.

The news underlines the likelihood that the latest cut represents the nadir for interest rates, since some had expected the more dovish MPC members to support a bigger reduction.

The minutes revealed a greater-than-usual focus from the MPC on the nominal rate, in other words including inflation, of UK economic growth. This growth rate had been around 5pc since 1997, but was set to be well below zero in the coming months, the minutes said, adding: "A significant programme of asset purchases was likely to be necessary in order to make up this shortfall in nominal spending."

Although the Bank retains its explicit 2pc consumer price index, these comments will underline the extent to which it is now also focusing on these other targets such as money growth and nominal GDP.

The Bank carried out its third reverse auction to buy £3bn worth of gilts from private investors, and although the event enjoyed a healthy subscription rate, economists pointed out that for the third time the main sellers of gilts were not pension funds but banks and hedge funds. The Bank has stated repeatedly that its primary intention is to buy gilts from non-bank institutions, which it presumes will be more willing and eager to reinvest the cash, thus kick-starting investment throughout the economy.

The Bank's Agents' Report of business throughout the UK also revealed companies are facing increasing pressure to cut jobs and improve their balance sheets, while sales are plummeting. It found that with some companies already breaching their loan agreements, "firms were wary of approaching banks for finance for fear of triggering an unfavourable review of existing terms." The finding underlines how precarious funding arrangements for many firms have become,