The Bank of England began a two-day interest rate policy meeting today. The market consensus is looking for a cut of 50 basis points to 1.5%. I expect a bigger decline to be announced at 12:00 GMT tomorrow. Here's why.

* The central bank got a late start. The central bank rate was 5.0% as recently as October 7th. At 2% now, the Bank is still behind the curve.

* Most central banks, and especially the Bank of England, have made a point lately to cut by more than consensus to shock psychology out of its stupor. The BoE reduced rates by 100 basis points last month and by 150 bps at its meeting in November.

* The Monetary Policy Committee felt in December that a bigger cut than the 100-bp move was appropriate but settled for the minimal justified action because market participants had not been properly prepared for a larger cut. There would be not surprise if officials cut more than 50 bps tomorrow.

* Within the past month, Deputy Governor Charles Bean, who is responsible for monetary policy, said rates might eventually need to go to zero.

* Within the G-7, it's a race between Britain and Japan for which country's real GDP declines the most in 2009.

* British GDP was already sinking very sharply last summer, falling in 3Q08 by 2.0% at a seasonally adjusted annual rate compared to drops of 0.5% in U.S. GDP and 0.8% in Euroland GDP. Consumption and investment made negative contributions to British growth, and imports rose faster than exports. Real GDP rose merely 0.3% between 3Q07 and 3Q08.

* U.K. industrial production posted a monthly drop of 1.7% in October, worst since 2003, and a 12-month decline of 5.2%, worst since 1991.

* Two widely watched house price indicators posted December-over-December declines of 15.9% (Nationwide) and 16.2% (Halifax). Mortgage approvals and gross mortgage loans were 61% and 51% lower in November than a year earlier. The housing market continues to get clobbered.

* Exports fell 3.4% between September and October.

* Despite a better-than-forecast 0.3% uptick in real retail sales in November, anecdotal evidence points to awful holiday shopping last month. The Nationwide consumer sentiment index fell a full point to 4.7 between October and December, while the GFK consumer confidence gauge of -33 in December was also very weak.

* The two monthly surveys by the business group, CBI, showed retail activity with its worst reading since at least 1983 and industry with a score of -35, nine points less than forecast.

* The service sector PMI had an average score of 40.9 in the fourth quarter, 6.6 points less than the 3Q mean of 47.5. The manufacturing PMI posted an average reading of 36.7 last quarter, 6.8 points less than its 3Q mean value. The construction PMI slid below 30 last month to 29.3. These levels imply a huge decline of GDP last quarter.

* Expected inflation over the coming two years has receded rapidly from 4.4% last August to 2.8% in the following quarterly survey.

* Average wages rose 3.3% in the year to 4Q08 and are headed downward as unemployment, which advanced by 127.5K between September and November, deteriorates rapidly. Consumer price inflation meanwhile fell to 4.1% from 5.1% and is likewise in full retreat now. Shop prices rose just 0.5% in the year to December.

The main argument against a bigger-than-50 basis point drop in interest rates is the vulnerability of the pound. December saw speculation intensify that sterling was headed to par and then below against the euro. Although the pound is 3.6% lower on a trade-weighted basis than when rates were cut on December 4th, it has shown greater resilience against the euro recently. Besides, the ECB is drawing increasing market criticism for not getting ahead of the curve in cutting its rates. With all economies in the same miserable basket, this is not the time for British monetary officials to get timid with its easing.