The Bank of England's Monetary Policy Committee has approved a reduction the Bank's rate by 0.25 per cent to 4.5 per cent.
In a statement issued this morning, the Committee said it had reviewed information about economic and financial developments which had become available since September - including the effects of the September 11 attacks - and the impact of the 0.25 per cent cut on September 18, and concluded that a further reduction of 0.25 per cent was now required.
The statement said: "It now appears that, even before the terrorist attacks, the prospects for global activity were somewhat weaker than projected.
"In the United Kingdom, revised data show that consumption and final domestic demand in the first half of this year had been growing faster than previously thought, and remain stronger than in many other countries.
"Looking ahead, the consequences of the terrorist attacks for the UK and the world economy are still unclear. Early indications are that the direct impact on the UK economy will be less severe than in the United States.
"But the weaker world outlook and increased uncertainty have set back UK business and consumer confidence, and may, for a time, restrain business and household spending.
"Against that background, the Committee concluded that a further reduction in interest rates of 0.25 per cent was warranted to meet the inflation target."