It is too easy to paint Bank of England governor Mervyn King as Santa Claus and Jean-Claude Trichet at the European Central Bank as the miserly Scrooge. Certainly, the UK monetary policy committee’s move to cut the official interest rate by 25 basis points on Thursday, to 5.5 per cent, is more in the Christmas spirit than the ECB’s decision to hold firm. To be fair, with rates at just 4 per cent, the ECB had little choice. But the fact that the Bank of England has been so widely cheered is probably the surest sign that its decision is not unequivocally the correct one.

There is much for the MPC to worry about. By its own admission, business and household spending is moderating and parts of the financial system are still reeling from the subprime crisis. Even so, the UK economy is forecast to grow a respectable 2 per cent next year, according the latest report by the Organisation for Economic Co-operation and Development, and pockets of data, such as Thursday’s manufacturing numbers, remain upbeat. Although output growth will probably slow during 2008, it is hard to see what has materially changed over the last month that necessitates a rate cut now.