The Bank of England has cut interest rates to a new record low of 0.25 per cent as part of a new multi-billion pound stimulus package for the economy.
It is the first time the Monetary Policy Committee has moved the base rate since cutting it to 0.5 per cent in 2009 at the height of the financial crisis. The vote to make the cut was unanimous.
Although the cut was widely expected, the pound nevertheless fell against the dollar and the euro.
However, the FTSE climbed on the news.
The Bank has also voted for a package of monetary stimulus measures, including purchasing up to £10bn in corporate bonds and an increase in quantitative easing to £435bn.
A new Term Lending Scheme will see the BoE lend to high street banks at close to the new record low base rate to encourage cheaper borrowing to households and businesses - and banks will face penalties if they fail to pass it on.
The Bank also slashed its growth forecast for 2017 from the 2.3 per cent in May to 0.8 per cent.
Rain Newton-Smith, chief economist for the Confederation of British Industry, said: The Bank has rightly prioritised growth in its response to greater economic uncertainty after the EU referendum. The innovation of the Term Funding Scheme will make it easier for banks to ensure that the interest rate cut will fully benefit businesses and households.
"The Bank’s expectation that the UK’s growth potential could be negatively affected by Brexit in the medium-term makes it all the more important for the Government to take swift, decisive action to unlock key infrastructure investment and show that the UK is open for business.
"With interest rates once again at record lows, expansionary fiscal policy can do more to shore up business and consumer confidence, and put the UK on a stronger growth path for the future."