Mervyn King, the Bank's governor, gave the green light for the government to use tax cuts or public expenditure increases to help limit the recession, and the official forecasts indicated interest rates had some way further to fall.
The pound sank on the gloomy outlook, dropping 2.9 per cent to a six-year low of $1.4939 against the dollar; it lost 2.5 per cent to a fresh record low of ￡0.8356 against the euro and fell 5.6 per cent to Y141.81 against the yen.
The Bank's central growth forecast suggested the year-on-year drop in national income would hit 1.9 per cent in the second quarter of next year and that for 2009 as a whole, the economy would sink 1.3 per cent.
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