The business community has welcomed the 0.25% cut, saying that it will help to shore up growth despite the recent problems in the housing market and the financial sector.

"This cut was badly needed, and will be welcomed by a business world that is feeling the pressures of the credit crunch and of slower growth," stated Confederation of British Industry (CBI) director-general Richard Lambert.

Other business groups have added that another cut in rates could be necessary in May. David Kern, Economic Adviser to the British Chambers of Commerce (BCC) called for a further cut to 4.75% in May is what UK businesses needed to sustain growth.

"We acknowledge that inflation remains a serious problem, meaning the MPC cannot afford to cut rates too aggressively. But, the threats to growth have become immediate and the MPC must be more pro-active. One cannot dismiss the danger that falling house prices may harm consumer spending and the wider economy. Undue delay in acting, threatens to reduce the effectiveness of interest rate cuts that the MPC itself has anticipated already.”