Before the MPC consider cutting rates again, they should stop and think hard the amount of money held in non resident sterling time deposits in UK banks.
There are two things to highlight about this data. First, this money belongs to people who don't actually live here in the UK. This money is here because foreigners want to earn an attractive return. As soon as they see a better deal elsewhere, or if they fear that they might actually lose their money, then this cash is gone.
Second, these accounts are denominated in sterling, which means that before this money leaves these shores, it will be converted into foreign currency. The laws of supply and demand will work their dark magic. A large inflow of unwanted sterling into the foreign exchange market will lead to a collapse in the exchange rate.
The amount of cash held in these accounts is huge. In December 2008, it was an amount equal to 30 percent of UK GDP. The growth of these deposits is even more shocking. Between September 1997 and April 2008, they increased by 450 percent.
So it is a case of cut rates if you dare, because if foreigners pull out this cash, sterling will fall like a stone.