Calling for a further cut in March, David Kern, economic adviser to the BCC, says: ‘Today’s move, though vital to sustain confidence, is not adequate on its own. The recent dramatic rate cuts in the US highlight the importance of early action. Threats to growth are much more acute now than risks of higher inflation, and we would have welcomed a bold UK move to five per cent today.’

The announcement was made following a sharp cut in interest rates in the US from 4.25 per cent to 3.0 per cent in a bid to stave off recession amid a gloomy outlook for the world economy.

Last month the Bank of England said that the risk of inflation, which is currently at 2.1 percent, has ‘worsened markedly’.

Analysts claim that a rise in crude oil prices is fuelling inflation as it begins to affect household energy prices, with gas and electricity bills having increased significantly over the past few months.