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BLOG: Extraordinary times call for extraordinary measures.

The Bank of England surprised all and sundry by boldly tripling most people’s best estimates and slashing 1.5 per cent off interest rates.

It certainly is a dramatic cut, down to 3 per cent - the lowest interest rates have been in the UK since Winston Churchill was puffing on cigars as Prime Minister.

Due to the unexpected size of the cut, it remains to be seen how quickly high street banks will move to cut their own rates and pass the benefits on to us.

Chancellor of the Exchequer Alistair Darling told the BBC “it's essential that the banks do pass on the benefit of lower interest rates to people and to businesses".

Most analysts welcomed the cuts as just what the UK economy needed, even if they were a little late coming.

It is also now expected that there will be more cuts to come, but the question is, how low can they go?

Several experts believe they could drop below 2 per cent next year – which, according to the Guardian, would be the lowest they have ever reached since the Bank of England was founded in 1694.

The Telegraph quoted Deloitte economic advisor Roger Bootle saying rates could even hit zero, as they did in Japan after its asset bubble burst in 1990.

But it comes down to that old chestnut, confidence - if there is no demand for funding, even zero interest rates cannot kick-start an economy.