The Bank of England has confirmed widespread speculation from analysts and cut the base interest rate by a quarter-point to 4.5% today.
The cut is the first by the Bank's Monetary Policy Committee (MPC) since August 2004.
Economists were in near-unanimous agreement that the MPC would shave rates after the release of minutes from the July meeting revealed a deadlocked committee, broken only by governor Mervyn King's vote to hold rates for one more month.
The move will come as a relief to retailers and manufacturers, whose falling sales volumes and output lent further credence to economists' demands in the last month.
Even trade unions called for a cut. The Trades Union Congress (TUC) stressed that with manufacturing in recession and the loss of more than 75,000 in the last year, a cut could have come no sooner.
"[The rate cut will] make millions of manufacturing workers feel just a little more confident about the future as they head off for their summer breaks," said Frances O'Grady, deputy general secretary of the TUC.
By and large, business across all sectors praised the MPC's decision.
"We believe the MPC has made the right decision," said David Frost, director general of the British Chambers of Commerce (BCC). "The economic situation has worsened, and the case or a cut in interest rates was compelling."
Frost warned, however, that while the cut will alleviate some of the economy's more acute pressures, the economic climate has worsened in recent months and business is facing "new dangers."
Once the noon announcement was made, analysts already began contemplating whether the day's activity would be a one-off for the MPC or the beginning of several cuts.
"Given some recent mixed data and survey evidence, the MPC seems likely to return to the sidelines for the near term at least," said Howard Archer, UK economist at Global Insight.
"Nevertheless, we expect interest rates to be down to 4.25% by the end of this year and to fall to 4% in the first half of 2006."
