Analysts said the move by the central bank's Monetary Policy Committee (MPC) to cut the rates was spurred on by the ongoing money market crisis and the slowdown in the housing market.

David Kern, Economic Adviser to the Britsh Chambers of Commerce, said:

"Although this move was expected, sadly it is overdue and a reduction to 5.00 per cent is no longer sufficient. We urge the MPC to consider a further cut in rates in May to 4.75 per cent.

“The ominous warnings in the Bank of England’s recent Credit Conditions Survey highlight the growing risks that the credit crunch may be worsening. Therefore, it is vitally important to ensure that problems in the financial sector and in the housing market do not damage wealth-creating businesses."