Calls on the Bank of England to make further rate cuts intensified last night, despite its emergency move to lower the base rate by half a point yesterday.

The Bank's Monetary Policy Committee (MPC) held its emergency rate-setting meeting in Threadneedle Street yesterday morning, allowing it to make the rate announcement 24 hours earlier than planned. It is the only the second time that it has deviated from its scheduled announcments since it gained independence in 1997.

The Bank dismissed claims that it had been pressurised to cut rates by the Government to help to boost the impact of the Treasury's rescue package. A statement issued by the Bank said: “The decision to cut interest rates was made entirely independently and in the usual way. The Government was informed just before noon.”

Many business groups gave warning that cutting rates to 4.5 per cent was insufficient to boost the flagging economy and said that the Bank should prepare to make further decreases.

The Institute of Directors (IoD) called for another half-point cut next month, if not earlier, while the TUC said that the move alone was insufficient to alleviate the risks of a deep, prolonged recession. The British Chambers of Commerce (BCC) said that rates should be cut to at least 4 per cent by the end of the year.

Miles Templeman, director-general of the IoD, said: “We strongly believe that a further interest rate reduction of 50 basis points will be required next month, if not before.”

Britain's economy skidded to a halt between April and June, according to official figures, and is now widely forecast to have entered a recession. The National Institute of Economic and Social Research calculated this week that the economy shrank by 0.2 per cent between July and September. A recession is defined as two quarters of negative growth.

Brendan Barber, general secretary of the TUC, said: “A half-point cut is not enough. A deep cut in rates would not only provide important help to businesses and mortgagepayers but would help to end the financial crisis.”

David Frost, director-general of the BCC, said: “We are thrilled that the Bank of England has taken this bold and necessary step. Over the next four months, interest rates must be cut to 4 per cent, as a minimum.”

Capital Economics forecast that rates could fall as low as 2.5 per cent next year, the lowest in half a century.

Investors were also unconvinced by the move. The FTSE 100 slipped after the rate announcement to plunge more than 5per cent before the close. European markets also fell, with the CAC 40, in France, closing down more than 6 per cent.

In the United States, the Dow Jones industrial average remained volatile amid concerns over the effectiveness of the rate cuts, finally closing 189 points lower at 9,258.10. The Standard & Poor's 500 index was down 11.3 points at 984.95.

Yesterday's announcement by the MPC was part of a co-ordinated half-point move with five other central banks to try to limit the fallout from the financial crisis on the economy. The Bank cut rates to 4.5 per cent and the European Central Bank lowered its rates for the first time in five years to 3.75 per cent.

The Fed cut its federal funds rate to 1.5 per cent and lowered its discount rate by the same amount to 1.75 per cent. Central banks in Sweden, Switzerland and Canada acted, too. The Bank of Japan said that it supported the move but did not cut its rates, which are at 0.5 per cent.

A joint statement from the central banks reflected their concern about the financial turmoil, which has not slowed despite a $700 billion bailout by the US Government last week. Investors are watching closely to see what effect yesterday's £50 billion bailout for British banks will have.

In a separate move, China cut its key rate by 27 basis points to 6.93per cent and lowered its reserve requirements by 1 per cent. This week, Australia cut its rate by 1 percentage point, the steepest drop in 16 years.

Analysts suggested that the Federal Reserve's unanimous vote implied a need to put individual opinion aside in order to present a united front.

The minutes of the MPC deliberations will be published on October 22.

Explore Economics

• Pre-Budget Report 2008

• Budget 2009

• World Economic Forum

• The Times MPC

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive