Seven central banks - including the Bank of England - have cut their interest rates by 50 basis points.

The Bank of England, the US Federal Reserve and the European Central Bank as well as the central banks of Canada, Sweden and Switzerland have all reduced their key lending rates in a co-ordinated move to ease the global financial crisis.

The Bank of England's Monetary Policy Committee today voted at a special meeting to reduce the official Bank Rate paid on commercial bank reserves to 4.5%.

The Bank of England’s Monetary Policy Committee said: ‘In the United Kingdom, CPI inflation rose to 4.7% in August, reflecting increases in food and energy prices. Inflation is likely to rise further to above 5% in the next month or two, in large part as the full effects of already announced increases in the price of domestic energy are felt.

Bank of England

'But inflation should then drop back, as the contribution from retail energy prices wanes and the margin of spare capacity in the economy increases. Pay growth has so far remained subdued and commodity price pressures have eased, with oil prices down substantially from their mid-summer peak.

‘Conditions in international credit and money markets have deteriorated very markedly.

'Many markets are closed. In the United Kingdom, the supply of credit to households and businesses is clearly tightening further as banks seek to adjust their balance sheets.

'The Committee noted that cuts in official interest rates could not be expected to resolve the current problems in financial markets and that a significant increase in the capital of the banking sector would be required.’