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The Bank of England's monetary policy committee voted unanimously in favour of the unprecedented, emergency half-point interest rate cut earlier this month as the financial system teetered on the brink of collapse.
Minutes of the October 8 meeting showed that the Bank's governor, Mervyn King, and the other eight committee members all agreed that 50 basis points should be lopped off rates as part of a coordinated cut by central banks around the world, including the US Federal Reserve and the European Central Bank. The cut took UK rates down to 4.5%.
The MPC said that the financial market turmoil and gloomy economic data over the month pointed to a severe downturn in the British economy and had shifted the risks to the inflation outlook to the downside.
The minutes said: "Given the global nature of the financial market turbulence, there was a strong argument for participating in the proposed coordinated international action."
Analysts believe that more cuts will be made next month with some predicting that rates will be slashed to 2% by next year.
Philip Shaw at Investec said: "It's not at all surprising that the vote to cut rates by 50 basis points was unanimous. The committee is talking about the evidence being clearly sufficient to justify a half point which hints that another fall in rates seems likely in November - particularly given the continued run of bad economic news."
In a speech last night, King admitted for the first time that the UK was entering its first recession since the early 1990s.
"The combination of a squeeze on real take-home pay and a decline in the availability of credit poses the risk of a sharp and prolonged slowdown in domestic demand. Indeed, it now seems likely that the UK economy is entering a recession," he said.
"It is surely probable that the drama of the banking crisis, which is unprecedented in the lifetime of almost all of us, will damage business and consumer confidence more generally."
Howard Archer at consultants Global Insight said: "Last night's speech by Mervyn King's indicated that further interest rate cuts are on the way.
"We expect the Bank of England to cut interest rates from 4.50% to 4.00% in November and to bring them down to 2.50% or even lower in 2009. We expect the economy to contract for four successive quarters through to mid-2009 before stabilizing. Subsequent recovery is then likely to be only very gradual. As a result, we see GDP contracting by 1.1% in 2009 and then growing by just 1.0% in 2010."
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