By Ben Morris
Business reporter, BBC News
Call it panic, or call it prudence - but what cannot be denied is that US authorities have shocked the markets with their large cut in interest rates.
The Bank of England is facing a dilemma over growth and inflation
However, should the Bank of England follow their lead?
Early next month the nine experts who set UK interest rates meet at the Bank of England (BoE).
On their minds will be the bold measure taken by the US Federal Reserve, which slashed interest rates from 4.25% to 3.5% on Tuesday.
That February meeting of the Bank's monetary policy committee will also have to ponder the shaky state of the UK economy.
Government borrowing is high and does not leave any room for extra spending to boost the economy.
The property market is slowing down and could possibly go into a major slump.
Very high personal debt means consumers could quickly get into trouble if there is a slowdown.
All that could mean pain ahead.
"If you have a binge, you have a hangover," former chancellor of the exchequer, Lord Lawson, told BBC's Newsnight.
"There's no getting away from it - we have had the enormous credit binge and now we're going to have the hangover."
But while the BoE will be wary of an economic slowdown, its priority is to fight inflation and that is uncomfortably high.
At 2.1% in December, inflation is above the Bank of England target of 2%.
Minutes from the Bank of England's interest rate meeting in January showed policy makers fear inflation could head even higher this year.
And Bank of England governor, Mervyn King, spoke about the dilemma in a speech on Tuesday.
"We face a difficult balancing act in the course of 2008," he said.
"But we start the year from a position in which bank rates at 5.5% is probably bearing down on demand."
Economists say that probably means interest rate cuts are on the way, but probably not the drastic measures employed by the US Federal Reserve.
"Whether to cut interest rates is a dilemma, not a no-brainer," says the BBC's economics editor, Evan Davies.
"Some in the market are getting ahead of themselves, Mervyn King is clearly open to cuts, but not open to slashing rates."
HAVE YOUR SAY
Other economists agree.
Markets will recover again as they always do. In the meantime, we have to tighten our belts!
"The message we get from Mr King is that the economy is going to slow, but it needs to," says Jonathan Loynes, UK economist at Capital Economics.
He forecasts that interest rates will fall this year and continue falling in 2009, eventually hitting 4%.
Mr. Loynes points out that, with some exceptions, UK interest rates have historically moved in the range of 4% to 6%.
At the low point of the last slowdown - in 2003 - the benchmark rate hit 3.5%.