The Bank of England has cut interest rates by a quarter percentage point to 5%.
The Bank's nine-member Monetary Policy Committee (MPC) voted five to four to bring borrowing costs down, bringing to an end the joint-longest plateau for rates since the Bank was granted independence in 1997.
Lower interest rates will instantly be reflected in many savings accounts and floating rate mortgages, though those selling fixed rate mortgages had long ago reflected the likelihood of lower rates.
The Bank's decision came after the consumer price index rate of inflation dropped to 2% - the MPC's target.
However, updated forecasts from the Bank's staff suggests inflation will bounce back in the coming months, rising to around 2.75% by the end of the year.
It is a watershed moment, since many economists expect the Bank to continue cutting borrowing costs in the coming months.
However, Governor Andrew Bailey warned that consumers should not expect the Bank to cut rates as rapidly as it had raised them (14 successive increases between late 2021 and mid-2023).
"Inflationary pressures have eased enough that we've been able to cut interest rates today," he said.
"But we need to make sure inflation stays low, and be careful not to cut interest rates too quickly or by too much. Ensuring low and stable inflation is the best thing we can do to support economic growth and the prosperity of the country."
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The Bank sharply upgraded its forecast for economic growth this year, from 0.5% to 1.5%. It expects the economy to expand by 0.7% in the second quarter, followed by 0.4% the quarter after that.
However, it said it had yet to incorporate the impact of any measures introduced by Rachel Reeves into its forecasts. The nine MPC members were briefed on the new chancellor's latest fiscal announcement earlier this week - about a "black hole" in the public finances and various measures to fill it.
That announcement included a 5.5% pay increase for public sector workers.
Bank insiders say that the deal is unlikely to stoke noticeable inflationary pressure, but it will do a full audit of the plans after the budget in October.
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