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The Bank of England's monetary policy committee has cut interest rates by half a percentage point to 1.5%, their lowest level since the central bank was founded more than 300 years ago.
Today's cut was widely expected in the City after a run of poor news on the economy, but disappointed business organisations who had clamoured for a cut of a full percentage point to 1% to unfreeze credit markets and prevent the recession from getting worse.
Business groups said another big move was essential after Threadneedle Street's quarterly credit conditions survey showed that banks have tightened lending to both families and firms, and plan to squeeze borrowers further in 2009. Bank of England and Treasury officials are drawing up a new package of emergency measures to kick-start lending.
The Bank has slashed borrowing costs from 5% since October, and has admitted that it previously underestimated the severity of the financial crisis. Analysts expect further rate reductions in coming months.
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