As expected, the two academics on the Bank of England's monetary policy committee (MPC) again went their separate ways earlier this month, Tim Besley voting for a quarter-point rate hike and David "Danny" Blanchflower, voting for a cut. The majority, seven, opted for no change, in line with the projections in the Bank's August inflation report. Either Besley or Blanchflower may turn out to be right in the end, but not both of them.

The case against a hike, by the majority of committee members, is made quite strongly in the minutes, suggesting they are happy to remain on hold for the time being. The minutes say: "The main risk would be that an unexpected rate rise might adversely affect business and consumer confidence, adding to the near-term downside pressures on activity and causing a material undershoot of the inflation target in the medium term. Although rates could be cut later in that event, the downturn would be unnecessarily deep, adding to the volatility in the economy." The minutes are here

Also today, the July public finances eased some of the pressure on the government, showing a current budget surplus of £6.6 billion. But this was £2 billion lower than a year earlier and cumulatively, the public finances are £9.3 billion further into the red than in the first four months of the 2007-8 fiscal year. The release is here.

After the gloomy combination of soaring inflation, rising unemployment and a downbeat assessment from the Bank of England, there was nothing for it but to travel back in time to 1990.

The summer of 1990 marked the beginning of the last recession, a downturn that was to last until the spring of 1992, making it the longest, though not the deepest, in the post-war period.

What was the Bank saying 18 years ago, in the summer of 1990? Then, of course, it was a mere agent of the Treasury, and not the interest-rate-setting body it is today. But it had a view, and it expressed it in its August 1990 quarterly bulletin.

Then, as now, oil and other commodity prices had risen, pushing inflation sharply higher. There was talk of a credit crunch as the banks reined back lending.

But the Bank of 1990 was quite hardline and, as it turned out, quite wrong. So concerned was it about inflation and rising wages that it dismissed business worries about impending recession, saying that the gloomy surveys then being published "don't add up to a strong risk of recession".

The Bank of England, in its quarterly inflation report, predicted a difficult year ahead, with inflation rising to a peak of 5% or more and output "broadly flat" over the next 12 months. In other words, stagflation-lite. It stopped short of calling a recession and Mervyn King insisted the medium-term outlook would be much brighter but this was a pretty gloomy report.

Though the report said the inflation risks were on the upside and the growth risks on the downside, it has been interpreted as dovish on rates and sterling has dropped in response. Judge for yourself by accessing the report here, where the webcast of the press conference and the Bank's opening statement can also be viewed.

The report's publication followed figures showing that employment growth has slowed to a crawl and that unemployment is up on both the claimant count and Labour Force Survey measures. The good news was that average earnings growth slipped back to 3.4% and remains very subdued. The release is here.

A poor set of inflation figures, with the headline consumer price inflation rate rising from 3.8% to 4.4% and even the core rate, excluding food, drink, tobacco and energy, climbing from 1.6% to 1.9%. The 4.4% rate was not only above economists' predictions but saw UK inflation rise above that in the eurozone, which had a 4.1% rate in July.

According to the Office for National Statistics, food price inflation has "spiralled" to 13.7%, while gas and electricity bills were up by 16.1%. RPI inflation rose from 4.6% to 5%, while RPIX (excluding mortgage interest payments) saw a rise from 4.8% to 5.3%. Like CPI, this is more than double the target (the old RPIX target was 2.5%). Further details here.

The Bank of England will get a lot of criticism for these figures. It will be hoping the drop in oil prices - just above $110 this morning - and other commodities continues.

This will be a difficult week for inflation and the latest producer price figures show plenty of pressures still in the pipeline. Output price inflation rose to 10.2% in July, from 10% in June. Input price inflation was 30.1%. If you wanted to be optimistic, you would note that "core" output price inflation was unchanged at 6.7% and that input price inflation fell slightly from 30.8% in June and, if the fall in commodity prices persists, may have peaked. Details here.

Following its latest quarterly meeting (carried out in conjunction with the Sunday Times) the Shadow Monetary Policy Committee (SMPC) voted to leave Bank Rate unchanged on Thursday 7th August. In particular, six members of the shadow committee voted for rates to remain on hold, while three members voted to cut the official interest rate by ¼%.

The bare vote understates the underlying ‘dovishness’ of the shadow committee, however, since all three cutters had a bias towards further reductions, three of the holders had a bias to cut aggressively in future months, and a further holder had a bias to ease. In contrast, only two of the SMPC members who voted to hold Bank Rate on 7th August had a bias to tighten in subsequent months.

The SMPC is a group of independent economists, who assemble quarterly at the Institute of Economic Affairs (IEA) in Westminster to monitor UK monetary policy. The inaugural SMPC meeting was held in July 1997 and the Committee has met regularly since then. That it is the longest established such body in Britain, and that it meets physically to discuss the deeper issues involved, distinguishes the IEA’s SMPC from the similar exercises now carried out by a number of publications.

Summer holidays are here, a good time to reflect on the past and on what is to come. After seven months of being battered by the twin shocks of a global credit crunch and surging oil and commodity prices, should we brace ourselves for an even grimmer autumn and winter?

The fall in the oil price from farcical to merely ridiculous levels, with other commodity prices easing in tandem, is good news, though it needs to drop a lot further to take one of those twin shocks away.

Evidence of an easing of the credit crunch is harder to find, despite slight reductions in mortgage rates, better news from some American banks and signs that predatory buyers are following Santander's example and circling some of Britain's troubled mortgage providers.

This may, however, be just clutching at straws. The record low for new mortgage approvals reported by the British Bankers' Association last month, two-thirds down on a year earlier, shows an unprecedented squeeze on credit availability.

Retailers, if you believe the official figures, have gone from boom to bust in a month, May's record 3.6% surge in sales volume being followed by June's unprecedented 3.9% plunge. The consumer trend, with sales up 0.6% in the second quarter, is plainly slowing. That is also true for the wider economy, which recorded its 64th consecutive quarter of growth in the second quarter, but of a mere 0.2%.

After a rollercoaster week for data, which included a record monthly drop in retail sales (on the back of a record monthly rise), official figures showed a 0.2% rise in gross domestic product for the second quarter. The record run, 64 consecutive quarters of growth, thus continued. Will it do so this quarter? It could be a close-run thing.

Both construction (down 0.7%) and production (down 0.5%) showed declines, so GDP was kept going by the service sector, up 0.4%. Transport, storage and communication rose by 2.2% while business and finance scraped a 0.1% increase. Compared with a year earlier, GDP was up by 1.6%, which is a pretty good indication of 2008's likely growth outturn. More details here.