Mumbai: The Bank of England today cut its key lending rate by a whopping 150 basis points, bringing the official borrowing cost down by a third from from 4.5 per cent to 3.0 per cent.

The Swiss National Bank and the European Central Bank (ECB) also reduced lending rates, for a second time in a month, bringing base lending rates down 50 basis points each.

The concerted move is aimed at at stemming the rise in European currencies, reviving credit flows and warding off a deep recession in Europe.

While the latest reduction is possibly the biggest in the history of the Bank of England since it gained independence, British and European rates are still way above the US base lending rate of 1.0 per cent.

The UK central bank has never cut interest rates by more than half a percentage point since it was made independent in 1997.

Last month, the Bank of England joined forces with the US Federal Reserve and the European Central Bank to cut base lending rates by 50 basis points in concert with other central banks.

Britain's economy shrank 0.5 per cent in the third quarter and many experts do not expect a recovery until 2010.

The 15-nation euro zone's economy, which had grown steadily since the bloc's creation in 1999, contracted by 0.2 per cent in the second quarter this year and most economists expect further fall in third quarter GDP figures.

"The current rate cut may not prevent European economies from slipping into recession but will provide a boost to consumer morale and relief to holders of sticky mortgage loans," it said in a statement.

The statement continued, "The past two months have seen a substantial downward shift in the prospects for inflation in the United Kingdom. There has been a very marked deterioration in the outlook for economic activity at home and abroad. Moreover, commodity prices have fallen sharply.

"Since mid-September, the global banking system has experienced its most serious disruption for almost a century. While the measures taken on bank capital, funding and liquidity in several countries, including our own, have begun to ease the situation, the availability of credit to households and businesses is likely to remain restricted for some time. As a consequence, money and credit conditions have tightened sharply. Equity prices have fallen substantially in many countries.

"In the United Kingdom, output fell sharply in the third quarter. Business surveys and reports by the Bank's regional Agents point to continued severe contraction in the near term. Consumer spending has faltered in the face of a squeeze on household budgets and tighter credit. Residential investment has fallen sharply and the prospects for business investment have weakened. Economic conditions have also deteriorated in the UK's main export markets.

"CPI inflation rose to 5.2 per cent in September. The substantial rise since the beginning of the year largely reflects the impact of higher energy and food prices. But commodity prices have fallen sharply since mid-summer, with oil prices down by more than a half. Inflation should consequently soon drop back sharply, as the contribution from retail energy and food prices declines, notwithstanding the fall in sterling. Pay growth has remained subdued. And measures of inflation expectations have fallen back."