The Old Lady of Threadneedle Street has been doing her very best to maintain a dignified silence in recent weeks, keen not to turn a drama into a crisis as debt investors around the world became more and more twitchy.
But it has become increasingly clear that this was more than just a storm in a sub-prime teacup. With the European Central Bank and the US Federal Reserve both digging deep to bail out the banking system in recent weeks, the Bank of England has been accused of sitting on its hands.
Today’s decision to hold interest rates at 5.75% for a second consecutive month was never in doubt, given the continued turbulence. But the very fact that the Monetary Policy Committee chose to make a statement today (normally it only does so to explain a change to the rate) is an indication that the Bank is feeling the heat. It has also promised to inject £4.4bn into the money markets next week to improve liquidity, if panicky banks continue to sit on their piles of cash rather than lending to each other.
So what next? The Bank tried hard to be reassuring today, suggesting that it was too early to tell what impact the recent disruption will have, and stressing that it was monitoring the situation closely. The ECB took a similar tack, holding rates at 4% and promising to keep its own beady eye on the markets.
The problem is that nobody seems to know exactly who is going to get stung by the US sub-prime crisis (apart from the poor US homeowners, of course) – and until that becomes clear, the panic seems unlikely to subside.
Of course, the credit crunch has not been bad news for everyone. UK mortgage holders, who have seen the cost of borrowing rocket in the last year (with five interest rate hikes since last August) might actually be thanking their lucky stars that a few debt market investors got a bit too clever for their own good.