UK producer prices data released today show how quickly the recession is developing. The cost of manufacturers’ raw materials dropped by 3.3 percent in November. Add in the rapid falls in oil and commodity prices and even lower figures lie ahead.

Among economists, “quantitative easing” is the topic of the moment. QE, as it’s abbreviated, means getting money in people’s pockets quickly.

Dropping banknotes out of helicopters is an image often used, but basically, central banks simply print more money and buy assets like shopaholics. They may purchase companies, corporate or government bonds, infrastructure projects, anything they can lay their hands on at short notice, in fact.

Howard Archer from IHS Global Insight: “The further substantial falls in producer output and input prices in November reinforces belief that consumer price inflation will plunge over the coming months in reaction to sharply lower oil and commodity prices, waning food prices, contracting economic activity, faster rising unemployment, December’s VAT cut and very favourable base effects. These factors seem certain to easily outweigh the inflationary impact of the very weak pound. Indeed, it seems highly likely that consumer price inflation will move back below the Bank of England’s 2pc target level in the early months of 2009 and will turn negative during the second half of the year.

“Consequently, we expect the Bank of England to enact a further hefty interest rate cut in January as it attempts to limit the length and depth of the recession. At this stage, we forecast the Bank of England to reduce interest rates by a further 75 basis points from 2.00pc to 1.25pc in January, but we would not rule out a larger cut if the economic downturn continues to deepen. We expect interest rates to fall to a low of 0.50pc in the second quarter of 2009 and then stay there for the rest of the year. However, it is far from inconceivable that interest rates could come all the way down to zero.”