The relatively subdued demand for today’s Bank of England auction of three month money may not mean that banks do not want extra cash, rather that they are unable to get their hands on it. Either way, it is clear that the strains in the money markets have recently grown and that this is spilling over into the wider economy. Accordingly, the Bank will have to announce more initiatives to solve the problems in the financial markets and cut interest rates much further to protect the wider economy.
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