It was hardly a well-kept secret. The Bank of England had received a raft of appalling numbers from the real economy this week. It was bound to cut rates deep today.

An hour ago, the Old Lady of Threadneedle Street duly obliged and cut by 100 basis points to two percent, the lowest figure since 1951.

It is clear that this is going to be a steeper and longer slump than most forecasters would own to until very recently. Next year will see the deepest of economic winters across the world.

Reflecting the gloomy forecasts, other central banks are slashing rates too.

Sweden’s central bank today cut its key rate by a record 175 basis points, to two percent, the largest since 1992 when the country famously nationalized its major banks.

New Zealand also announced a cut of 150 basis points to a five-year low of five percent. Further cuts are on the cards.

Indonesia made a surprise 25 basis-point cut to its rate, to 9.25 percent.

Yesterday, the Bank of Thailand cut rates by 100 basis points to 2.75 percent, some of which may have been due to recent political turmoil in the country.

On Tuesday, the Reserve Bank of Australia surprised markets with a 100 basis-point cut to 4.25 percent.

The European Central Bank is expected to cut again today, but signals are mixed. The Shadow ECB has called for swift, deep cuts from its current rate of 3.25 percent. However, voices close to the ECB warned not to expect them. The lack of a strategy is a major criticism of the “Bank without a Treasury”.

All bank authorities are aware that 2010 is the year when inflation will return with a vengeance if a prolonged deflation can be avoided. Most are fighting the latter tooth and nail, while making noises about having the medium term under control.

We shall see.

John Maynard Keynes has never been so popular. The name of this world famous British economist, who died in 1946, is on everyone’s lips these days, including Gordon Brown’s.

However, Keynes’s ideas are often misrepresented, or misunderstood, by both Left and Right in politics.

The Left believes his economic strictures are for all occasions, when they were proposed for slump conditions only. The Right thinks his views were Marxist and should never soil their delicate monetarist palette.

In fact Keynes had a lot to say about monetary policy. His flaw is that he was too broad brush on inflation, even appearing to brush it away.

Roger Bootle of Capital Economics has written an excellent summary-for-dummies on Keynes and Keynesianism in the UK’s Daily Telegraph.

Read it here

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Mark Hake, an analyst at Merrill Lynch, says the British housing market could take 20 years to recover from its current downturn.

Merrill, one of the City of London’s leading investment banks, said, in a note to clients, ” … it looks significantly worse [than the 1990 downturn], with house prices falling faster and further and very little recovery in real terms expected over 20 years. … House prices are expected to be below their August 2007 peak in a further 10 years’ time.”

The bank forecasts house prices to fall by as much as 17 per cent this year, while inflation is set to continue its upward march in coming months as the economy absorbs the effects of higher oil and food prices.

To add to the woes, David Kern, economic advisor to the British Chambers of Commerce, thinks unemployment will rise to nearly two million by the end of 2009. He commented, “The results of this survey signal a menacing deterioration in UK prospects We are now facing serious risks of recession. London appears pretty weak and it’s across the board. Businesses are in a lose-lose situation. Falling demand and the squeeze on consumer disposable incomes will limit how far prices can be increased.”

The European Central Bank (ECB) today defied the threat of recession in many eurozone countries and raised interest rates to their highest level for almost seven years, despite frantic political pressure.

ECB President, Jean-Claude Trichet, issued a strong warning on Wednesday that inflation in the zone could explode if left unchecked.

The decision by the ECB’s Governing Council is set against calls to hold firm from European leaders led by President Sarkozy of France. It comes after a leap in eurozone inflation to 4pc in June which set alarm bells ringing over price pressures. This was further fuelled by a rise in factory-gate producer prices within the eurozone, which jumped 1.7pc in May, to stand 7.1pc up on a year earlier. The hike was largely driven by an 18.2pc year-on-year rise in energy costs.

More depressing numbers were released today confirming that the eurozone’s services sector, which is at the heart of its economy, shrank in June for the first time since mid-2003.

Economists pointed out new indications of “stagflation” in the eurozone economy, with output contracting as price pressures continue to build. They believe that today’s interest rate increase is a single-shot for the rest of the year.

Could that be more in hope than expectation though?