Last Updated: 1:03PM GMT 05 Mar 2009
The cut matched the expectation of City economists and caps a period in which interest rates have fallen dramatically from their recent high of 5.75pc in the summer of 2007.
However, the focus will now be on the bank's effort to pump new money into the ailing economy. The Bank's Governor Mervyn King has been given permission by the Chancellor Alistair Darling to create £150bn of new money.
The Bank, which has cut the cost of money dramatically since the collapse of Lehman Brothers in September intensified the financial crisis, is now moving beyond making money cheaper. By adding new money to the economy at a time when interest rates are hovering above zero, Mr King will be hoping that money is lent and helps ease the credit drought suffered by consumers and businesses alike.
“Savers lose out again as the Bank of England opts to cut rates and inject more adrenaline into the ailing economy," said Stuart Porteous, Head of RBS Group Economics. "The Bank takes UK policy into uncharted territory - printing money."
The Bank of England has cut interest rates to an historic low of 0.5pc and unveiled radical plans to inject £75bn of new money into the economy to combat recession.