Members of the Bank of England's Monetary Policy Committee voted unanimously to cut interest rates to 5.5% earlier this month, minutes from their meeting show.

Their 9-0 vote to reduce rates by a quarter-point initiated the first cut in the cost of borrowing since August 2005.

The committee said its decision was a pre-emptive one and said it would help to reduce the risks which have been brought about by the recent credit crunch.

Some economists believe that the unanimous vote will mean borrowers can expect rates to be cut further in the new year, with most forecasting that a reduction could come as early as February. They are also predicting that another cut could be on the cards, with rates possibly going down to 4.75% by the autumn.

Global Insight economist Howard Archer said: "The MPC has clearly become significantly more concerned about the growth outlook and the dampening impact of the credit crunch, and is prepared to act despite ongoing concerns about near-term inflation risks."

The Bank's minutes show that a "substantial loosening" in interest rate policy may be needed to tackle slowing economic growth.

While members said they remain concerned about the impact of such action on inflation, they said five interest rate rises in 18 months and the expected slowdown in domestic demand should help to reduce inflationary pressures.

The minutes said: "This put the committee in a good position to act pre-emptively to reduce the risks stemming from the tightening of credit without losing credibility among wage and price-setters."

At the start of December, a rate cut seemed unlikely, but odds on a move shortened after a series of reports suggested confidence was crumbling in both the housing market and retail sector.

The Bank said: "The worsening financial market turmoil, and the consequent tightening of credit conditions, had increased the downside risks to activity and inflation in the medium term. Signs of slowing growth in the industrial world were already apparent.

"That suggested a substantial loosening in policy might be needed. However, a large reduction in Bank rate now would increase the upside risk to inflation."

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