The Bank of England has slashed interest rates to 2%.
The 1% cut in interest rates will be a welcome boost for retailers that have seen a significant drop off in consumer spending in recent weeks.
However, the Bank of England slashed interest rates by 1.5% to 3% last month but according to retailers, this has not yet had any impact on spending because of widespread nervousness around the economy and fears around unemployment.
British Retail Consortium director general Stephen Robertson said: "This is exactly the type of decisive action we need during these uncertain times. With the threat of inflation fading, the Bank of England is right to concentrate on jump starting the economy."
"Decisions now will greatly influence how long and deep the recession is."
"Retailers are passing on VAT cuts and going further with big discounts of their own to help hard-pressed customers. The Bank's job is not done. It must continue to cut rates in the New Year to get the economy heading in the right direction again."