Panic stations or solid policy?

The Bank of England's decison to cut interest rates this lunchtime to 5.25% suspense was no doubt a response to the credit crunch and the recent fall in stock markets.

Is it sensible economic policy?Well perhaps this knee jerk reaction by the bank has more to do with instilling confidence in the great British public rather than any sound long term economic planning.

According to BBC online news,its accompnying statement said

"Inflation at 2.1% in December was close to the 2% target, but higher energy and food prices are expected to raise inflation, possibly quite sharply, in the coming months."

adding that

The Committee needs to balance the risk that a sharp slowing in activity pulls inflation below target in the medium-term against the risk that elevated inflation expectations keep inflation above target

I always doubted the inflation figures,but surley all this cut is going to do is to once again fuel credit growth and house price inflation,things that got us in this mess in the first place