The Bank of England cut interest rates by a quarter percentage point today for the third time in five months in an attempt to cushion the economy from the global credit squeeze.
The cut to 5% had been widely expected following data pointing to a downturn in the housing market, falling consumer confidence and a slowing economy.
Credit market turmoil has made banks reluctant to lend, meaning little, if any, of the previous two rate cuts since December has been passed on to consumers and businesses.
Mortgage rates for many borrowers have actually risen and the central bank's credit conditions survey last week warned that the situation could get worse.
Nevertheless, policymakers are also concerned about price pressures. Inflation has been above the 2% target since October and is likely to rise further as higher food and commodity prices work their way through the system.
