The Bank of England has cut interest rates to 5.5% from 5.75%.
This is the first time interest rates have been cut in 2 years. Interest rates have risen five times since the middle of last year, but the Bank had kept rates on hold since July.
The Bank has been keen to keep price growth under control, and many analysts had predicted that they would want to see oil and food cost pressures abate before moving to lower interest rates.
However, reports from Nationwide and Halifax this week have shown falling house prices and a slump in consumer confidence.
