The Bank of England has said over and again that we must have an economic slowdown before it can be happy about chopping interest rates the way pretty well everybody says it will anyway.

Well, the slowdown is here and now. Listen to the cries of pain. Why didn't the Bank have mercy and get on with it yesterday?

Maybe it noticed that not everybody is crying. If you shop at John Lewis, or Sainsbury's - yes, Sainsbury's - or buy your house with a Halifax mortgage, you are not slowing down at all, it would seem. The auguries are still mixed.

The compelling reason for cutting interest rates is to relieve the credit crunch. The Bank itself has reported a money shortage the like of which we haven't seen since Ted Heath's Chancellor Tony Barber scrapped the Government credit controls (with disastrous consequences, short-term). Mortgage lenders have become so choosy that the number of mortgages they lend is shrinking visibly month by month. Worse, the banks are clamping down on lending to companies.

Strangely, the credit crunch that started the trouble has all-but gone away. The multi-billions that the big central banks pumped into the system before Christmas so that banks and others could square up their books by New Year's Eve, seems to have worked its magic. Three-month money lent between banks is cheaper than at any time since last August.

The catch is that the crunch has migrated to the real economy. Nobody knows quite why. The plausible reason is that our bankers have had the fright of their careers. Heads galore have rolled in America - some very big heads. Nobody here is inclined to take chances that would have been routine six months ago. Fear has supplanted greed. Risk aversion is high fashion. Lower interest rate cuts might change that mood over time, but not between one day and the next, nor one month and the next.

Remember, the Bank's remit is to meet its two per cent inflation target. It has little chance of doing that in the coming months, what with Npower's 17 per cent gas bill increase, oil at $95 a barrel and Chinese price cuts drying up.

This is January, the big month for pay deals and pay claims. Public sector unions are setting their sights on seven per cent. Faced with a similar prospect on the Continent, the European Central Bank's Jean-Claude Trichet yesterday threatened to raise interest rates, no question of cutting them.

That may be bluster.

Be thankful our own Bank's Mervyn King refrains from it. But we must expect him to be doubly wary as the annual pay round develops - beyond February, that is.

One shrewd comment yesterday came from Stephen Carr, chief executive of West Bromwich Building Society.

He is as keen on cheap money as anyone else involved in the housing market. He called for a half-point cut back in October. But yesterday he accepted that any cut would have looked like panic.

Financial markets are twitchy enough, without getting the idea that the Bank knows some horror that nobody else knows.