Bank cuts interest rates to 2%

The Bank of England has cut interest rates to 2%; the lowest level since 1951.

A cut had been widely expected by business groups and analysts but there was some doubt over whether the monetary policy committee would impose such a sweeping cut after the 1.5% fall last month.

The Federation of Small Businesses and Confederation of British Industry welcomed the news but called on banks to pass on the cut in full to variable and tracker mortgage holders.

"This sends out the right message to the banks to lend fairly to small businesses," said the FSB's national chairman John Wright.

"One in three of our members are still reporting trouble accessing finance so this move is very welcome.

"The burden is now on the banks to pass this cut on to their customers. This cut will provide a welcome piece of mistletoe to give a kiss of life to the economy when it needs it most."

Some analysts have predicted that rates could come down to 0% next year as inflation falls below the government's 2% target.