Central bankers have a reputation for being opaque. This week, the Bank of England could not have been clearer. The recession will be grim and there is a risk of deflation. The Bank will cut interest rates further and Mervyn King, governor, gave support to a fiscal stimulus. Policymakers must now set out serious plans to reassure investors about the UK.

According to the Bank of England’s three-monthly Inflation Report, released on Wednesday, the highest probability outcome is a 1.9 per cent fall in output – a marked downgrade from August’s forecast of “flat” growth. It predicts that the recession will reach a trough next spring, growth will begin again only at the end of 2009 and output will not recover its 2008 peak until late 2010.