"Should sub-zero growth lead to sub-zero inflation, the pressure will be on the Bank of England to cut interest rates as close to zero as possible. Lower VAT will add to that pressure since it will cut prices in the shops. Clearly, it is impossible for bank rates to fall below zero, but there is no reason why they should not be reduced to 0.5% next year, should the deflationary threat materialise. Japan already has rates below 0.5% and the US is heading in that direction.
"Policymakers in Tokyo have had experience of dealing with the triple-zero economy (zero growth, interest rates and inflation) but their counterparts in the west have not."
—Larry Elliott, "Economics: Darling needs to cure a nation hooked on debt: The chancellor should look beyond giving consumers a short-term fix," The Guardian (UK), November 24, 2008.
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