The Bank of England has cut interest rates by 1.5 percentage points to 3%, giving retailers a boost in the run up to Christmas.
The interest rate cut has been much-anticipated by high street retailers who are hoping it will improve consumer confidence and kick-start sales in the vital pre-Christmas period.
The interest rate cut follows fears that shoppers would kerb spending in the wake of the economic downturn and looming recession.
Retailers including Marks & Spencer and Next this week gave a cautious outlook for the rest of the year and going into 2009, although the later said that lower interest rates would boost discretionary spend.
At the beginning of last month, the Bank of England cut interest rates by 0.5 percentage points to 4.5 per cent.
The Bank of England's Monetary Policy Committee, in conjunction with the US Federal Reserve, Bank of Canada, The European Central Bank, Sveriges Riksbank, the Swill National Bank made joint and simultaneous cuts in interest rates to increase price stability.