Surprise interest rate cut

The move comes after 14 months of rates staying the same. Most City analysts thought that the Bank would maintain rates at 4.0% to keep a lid on the housing market and general inflation.

But the Bank warned of a gloomier economic outlook. "Over the next two years, the prospects for demand, both globally and domestically, are somewhat weaker than previously anticipated," a Bank statement said. The cut would help keep inflation "on track", today's statement added.