The Fed decision? So passé. Not to be outdone, the Bank of England today is heralding a new era of overpriced risk in the market relative to its fundamentals. Think of it as the unstoppable force against the immovable object. In the summer, the price of risk clocked in at an unsustainable low. These days, it’s just the opposite. By now, we assume you’ve already ravenously devoured today’s superexciting “semi-annual financial stability report” out from the B of E. But did you know this?: Embedded in its bone-dry contents are a coded message, exhorting the risk addicts of Europe who breathlessly thronged to the market this time last year (and have since scattered to parts unknown, probably Spain) to get their sweet cheeks back to Old Blighty. More on the meaning behind the message.

The Bank of England said the credit crisis has left investors too pessimistic about asset prices, raising the prospect of respite for Britain's financial system in coming months.

"The pricing of risk in credit markets seems to have swung from being unsustainably low last summer to being temporarily too high relative to fundamentals," said John Gieve, the bank's deputy governor for financial stability. "While there remain downside risks, the most likely path ahead is that confidence and risk appetite will return gradually in the coming months."

The central bank's semi-annual financial stability report shows the probability and threat of more shocks to the economy have risen. It still marks officials' first signal of hope that market turmoil may ease as banks take up an offer to swap mortgage securities for government bonds and Royal Bank of Scotland Group Plc and HBOS Plc sell shares to repair depleted balance sheets.

"To reinforce those prospects of recovery, we need to restore confidence in the banking system,'' Gieve said in a statement today. "That is why we have launched the special liquidity scheme and why I welcome the steps taken by some banks to strengthen their capital positions."

The U.K. central bank delayed the release of the report until today after announcing its swap plan on April 21. Governor Mervyn King pledged then to meet demand from banks even if it exceeds an estimate of 50 billion pounds ($99 billion).

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