The Bank of England dramatically slashed interest rates by 0.5 per cent today along with central banks around the world in response to the global financial turmoil.
The snap decision by the Bank - a day earlier than expected - came as the Treasury announced a £50bn bail-out of the banking system.
The Bank's half-point cut is the first such move since the aftermath of the 9/11 terror attacks in November 2001.
The US Federal Reserve cut half percentage-point today, as did the European Central Bank and Swiss, Canadian and Swedish central banks. In an attempt to stem unprecedented global market turmoil, the Fed cut its key federal funds lending rate by half a percentage point to 1.5 percent and also lowered its discount rate by the same amount to 1.75 per cent.
The ECB also cut by a half-point to 3.75 per cent.
China also joined the effort, cutting its key rate 27 basis points.
The Bank of Japan, with rates at just 0.5 per cent, did not ease but the Fed said the BOJ expressed its strong support for the coordinated policy action.
"Incoming economic data suggests that the pace of economic activity has slowed markedly in recent months," the Fed said in a statement.
"Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit."
The Fed said that while inflation has been high, recent declines in energy and other commodity prices had tempered inflation risks.
It said the vote to cut US rates was unanimous and that inflation expectations appeared to be diminishing which could help support price stability.
"The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability," the Fed said.