This US business cycle is something new: never before have interest rates been slashed so far, so early. That aggression was justified because when the Federal Reserve made its last big rate cut in March the US economy seemed on the brink of financial catastrophe. Now, however, inflation risks are creeping upward, and any improvement in financial conditions will mean that policy is too loose.

Back in March, when Bear Stearns went down, the US was at risk of a spiralling financial crisis. Parallels were drawn with 1929 - and they were not ridiculous. The Fed therefore cut rates by far more than the growth and inflation data would normally justify to offset banks' extreme reluctance to lend.