A 0.5 per cent cut in the base rate has been announced by the Bank of England, bringing the figure down to 1.5 per cent.
The move, which was revealed at midday today by the monetary policy committee (MPC), means the rate is now at its lowest level since the Bank was formed 315 years ago.
Justifying its decision, the nine-member body stated that the action was necessary given that current indications point to further economic contraction taking place.
This, along with falling inflation, meant the cut was needed to prevent the consumer prices index falling below its two per cent target, the MPC added.
Homeowners and borrowers who are hoping to become debt free could benefit from the move, as it may result in the cost of mortgages and loans coming down.
The decision has been welcomed by the Liberal Democrat shadow chancellor Vince Cable, however he also noted that the move “can only go so far” to help borrowers.
By Tom Musk