The Bank of England's monetary policy committee has bowed to City fears over the US economy and cut interest rates by a quarter point.

The committee of "wise men" agreed the cut following a two-day meeting. The decision now brings rates down to 5.5 per cent.

Continuing doubts about the strength of the American economy and the impact of the foot and mouth crisis played a significant part in the decision.

Business leaders yesterday upped the pressure on the committee for a cut as new economic data showed slowing growth and falling inflation. They believe lower interest rates will insulate the UK economy from a pending global turndown.

The committee held rates at 5.75 per cent last month, following a quarter per cent cut in February. It has since come under sustained pressure from manufacturing industries which are expecting to bear the brunt of a down-turn in the US economy.

The decision fuels the case for a June 7 election with the feel-good factor having reached voters' pockets, along with the package of tax benefits already announced by Gordon Brown.