The Bank of England yesterday urged the Treasury to hasten plans to ease the flow of credit to companies, as it cut official interest rates to a 315-year low of 1.5%.

Warning that the 'world economy appears to be undergoing an unusually sharp and synchronised downturn,' the Bank said it needed to cut interest rates by a further 0.5 percentage points to prevent inflation falling too far for too long.

But it made clear that rate cuts alone were not enough to get the British economy moving again. 'The availability of credit to both households and businesses has tightened further, pointing to the need for further measures to increase the flow of lending,' it said in a statement.

The government has said it will introduce a further package intended to increase the flow of credit within a few weeks. It is trying to gather international support for a package to restore funding for banks, bank lending and to ease pressures in international capital markets.

Financial Times