The Bank of England has announced a reduction of one per cent to its official base rate of interest.
It brings the rate down to two per cent, following last month's cut from 4.5 per cent.
Explaining the move, the Bank's monetary policy committee (MPC) said that there is a "substantial risk" that inflation will fall below the target of two per cent in the medium-term, after the consumer prices index growth rate was found to have slowed.
It added that a return to normal lending would be "unlikely" without the introduction of a third consecutive cut.
"Despite the actions taken to raise bank capital, ease funding and improve liquidity, conditions in money and credit markets remain extremely difficult," the MPC stated.
The reduction could lead to cheaper rates for secured and unsecured loans customers.
Last month's cut of 1.5 per cent was the biggest the Bank has made since being given rate-setting independence in 1997.
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