The Bank of England has cut interest rates to 1.5%, the lowest level in its 315-year history, as it continues efforts to aid an economic recovery.

The half percentage point reduction brings interest rates below 2% for the first time since the Bank of England was founded in 1694. The half-percentage point cut brings the rate to its lowest level in the central bank's 315-year history.

The Bank cited weakening consumer spending, a tightening credit market for households and businesses, and a deteriorating business and residential investment outlook in announcing the decision.

Manufacturers' association EEF said the move was "too timid", and that the Bank should have cut rates further. The Bank has now reduced rates four times from October's 5% level.

Explaining its decision, the Bank said the level of contraction in business activity had "increased during the fourth quarter of 2008, and that output is likely to continue to fall sharply during the first part of this year". It added: "Surveys of retailers and reports from the Bank's regional agents imply that consumer spending has weakened."

But financial analyst Todd Benjamin said he didn't expect the move to kickstart the UK economy. Like many western nations, the UK has been badly hit by the global financial crisis with the government providing bailout money to many major banks and many high street household names already bankrupt.

"I think rates were already low enough; if they were going to alleviate (the situation) they would have done so already," Benjamin told CNN.

BBC economics editor Hugh Pym said the Bank was now being more cautious after the sharp cuts in interest rates in November and December."There is a hint in its statement that it may sit tight for a while to assess the impact of the big reductions over the last couple of months," he said.

The problems faced by savers were highlighted today as Bank of England figures revealed that even before this month's interest rate cut banks and building societies were paying the lowest rates on offer since records began in 1995.

Banks and building societies have been arguing strongly that any more cuts will be particularly bad for savers. However, lenders will be reluctant to pass on the full 0.5% cut to people on standard variable rates.

According to the Bank, the average return on instant access accounts slumped from 1.68% in November to 0.81% last month, while returns on notice-accounts - those where 30 or 90 days' notice is needed - and savings bonds slumped from 2.3% to 0.82%. For cash Isas the average interest rate plummeted to 2.09% from 3.83%.

These rates are likely to fall even further as the figures do not reflect the percentage point reduction on 1 December, which many savings providers only passed on this month, or last week's additional half-point base rate cut to 1.5%.