The good news for the UK is that the market only expects annual inflation of 3.45 per cent over the next 10 years. The market also seems strangely happy with signs that the government could resort to nationalising Northern Rock. Moreover, the word is that the Bank of England might cut the bank rate on Thursday. The bad news is that that is the good news.

Other bad news comes from the Libor interbank lending market. Sterling Libor, at 6.65 per cent, is 90 basis points higher than the bank rate – the equivalent figure for the US is 65bps. So there is a case for a rate cut to boost liquidity.