The Bank of England Monetary Policy Committee (MPC) has voted to lower interest rates by 0.25% to 4.5%.
The decision to lower rates has been widely anticipated since the last meeting of the MPC which narrowly decided, by a vote of 5-4 in favour, to maintain interest rates at 4.75% in July.
But economic pressures including a dwindling housing market, falling consumer confidence and weak retail and manufacturing industries led to calls from the Confederation of British Industries and Council of Mortgage Lenders among others for a rate cut.
And earlier this week BDO Stoy Hayward predicted interest rates would be cut twice due to poor economic indicators.
In a statement the BoE says: "In the first half of the year, output growth in the United Kingdom was subdued. Household spending and business investment growth have slowed. Although there are some signs of a pickup in consumer spending, downside risks remain in the near term. Looking further ahead, however, the rise in equity prices and the recent fall in the exchange rate should boost activity.
"CPI inflation was 2% in June. Higher oil prices may raise inflation further in the short term. But, in the Committee's view, the slackening in the pressure of demand on supply capacity should lead to some moderation in inflation. Against that background, the Committee judged that a decrease of 0.25 percentage points in the repo rate to 4.5% was necessary to keep CPI inflation on track to meet the 2% target in the medium term."
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