The move is aimed at boosting lending by banks to consumers and businesses to kick start the ailing economy.

The Bank of England has also announced that it will be investing up to £75bn pounds in corporate bonds and government securities in a move known as "quantitative easing". Analysts had expected the figure to be around £100bn.

Through direct investment into bonds and gilts, the bank hopes that the availability of funds will be boosted and leading will increase.

Quantitative easing is also known as "printing money" despite the fact that no new notes are actually printed. Instead the supply of funds is increased electronically but has the same effects as printing additional notes.

More to follow….

Also see:

Bank of England governor says UK in 'deep recession'

The base rate cut may get the economy back on track, but will take some time