Bank of England under pressure to cut rates by as much as one percentage point

A substantial cut in interest rates is expected today as the Bank of England comes under pressure to counter the slide into recession.

The announcement at midday is likely to at least repeat last month's cut of half a percentage point, which took the rate to 4.5%.

However, the reduction could be as much as a full percentage point, which would be the biggest interest rate cut in 15 years.

This would take interest rates down to 3.5%, a level not seen in the UK since 2003.

Recent figures showing a sharp downturn in manufacturing and services have led lobby groups such as the CBI and the Institute of Directors to put pressure on the bank for a big cut.

The manufacturing sector has declined for the seventh month in a row, while the service sector shrank at the fastest rate in 12 years.

Despite the interest rate cuts from the Bank of England, high-street banks are expected to put up their own lending rates to protect their profits.

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