Industry leaders and homeowners are celebrating after the Bank of England responded to calls for a cut in interest rates.
The quarter-point reduction to 3.5 per cent marks a dramatic start for new Bank of England Governor Mervyn King in his first meeting as chairman of the Monetary Policy Committee (MPC).
The MPC has adopted a "wait-and-see" approach on rates since March, but it appears its patience over the pace of economic recovery snapped.
In a statement accompanying today's announcement, the MPC said the recovery remained "hesitant", adding that a cut had been necessary to keep inflation on track in the medium term.
Business groups praised the decision and said the action had been justified by the ailing state of the manufacturing sector.
Rates were already at a 48-year-low prior to today's announcement but are now the same as in January 1955. The decision could knock £12 a month off the cost of a standard £80,000 mortgage.
The announcement comes after data earlier this week showed the manufacturing sector remained in the mire, with output weakening in May. GDP growth also stuttered to just 0.1 per cent in the first months of 2003.
PA