The Bank of England's Monetary Policy Committee had held the rate at 4.75 percent since August 2004 when the rate was raised, the Financial Times reported. The last rate cut came in July 2003.
Business groups hailed the anticipated rate cut but hinted that more such moves may be needed.
"While today's cut in interest rates should alleviate some of the most acute pressures facing the economy, the U.K. economic climate has worsened and we are facing new dangers," said David Frost, head of the British Chamber of Commerce.
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