The Bank of England has just cut interest rates by 1% to 2%.

This puts them at their lowest level since September 1939, according to Sky News or 1951, according to the BBC.

It follows last month’s cut of 1.5%.

12.30pm Ian McCafferty, the CBI Chief Economic Adviser gave his reaction as follows:

“The economy needs a significant monetary stimulus and the Bank has clearly decided this will be best achieved by another big cut in interest rates. What is critical for business and consumers alike is that this reduction is passed on. The economy is stalling, inflation is expected to undershoot the Bank’s own target and the headline RPI rate of inflation is likely to turn negative for at least a few months in 2009. We need to see lending improve and to keep business working.”

12.45pm Reaction from George Osborne:

”We have called for active monetary policy to tackle the recession so I welcome this bold move by the Bank of England. Sadly there couldn’t be a clearer sign of just how sick the British economy is under Labour’s recession. Gordon Brown’s claim just a few weeks ago that Britain was well prepared now lies in tatters. It’s essential not only that the rate cut is passed on by the banks, but that the government also takes action to get lending flowing to businesses. That’s why we proposed the National Loan Guarantee Scheme to keep thousands of people in work."

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