Bank of England shaves another quarter point off interest rates despite fears over inflation

The Bank of England has cut interest rates from 5.5% to 5.25% to try and stimulate the economy in light of the credit crunch.

The Bank’s monetary policy committee voted to reduce interest rates but said demand growth needed to slow for inflation to remain within the Bank's targets in the medium term.

In a statement the Bank said: "Cosumer Price Index inflation, at 2.1% in December, was close to the 2% target, but higher energy and food prices are expected to raise inflation, possibly quite sharply, in the coming months. And the lower level of sterling will boost import costs.

The US Federal Reserve has already cut rates from 4.25% to 3%.

The Bank Rate was reduction by 0.25% to 5.5% on 6 December 2007.