Interest rate cuts are designed to boost demand in the UK economy in three ways. The aims are to encourage people to save less and spend more now; damp down the exchange rate and aid trade performance; and boost the incomes of borrowers who tend to be more cash-constrained than savers.

Kevin Daly of Goldman Sachs has a rule of thumb that in normal times a 1 percentage point cut in rates should boost the economy by 0.3 per cent in the long run. The core equations of the Bank of England’s model suggest a very similar result.