The Bank of England has cut interest rates for the first time since 2009, revived its bond-buying program and said it would take "whatever action is necessary" to achieve stability after Britain's vote to leave the European Union.
The central bank said it expected the economy to stagnate for the rest of 2016 and suffer weak growth throughout next year. It cut its main lending rate to a record low 0.25 per cent from 0.5 per cent, in line with market expectations.
But it also launched two new schemes, one to buy STG10 billion ($A17.55 billion) of high-grade corporate bonds and another - potentially worth up to STG100 billion - to ensure banks keep lending even after the cut in interest rates.
Sterling fell 1 per cent against the US dollar following the announcement, while British government bond yields hit record lows and the main share index rose by 1 per cent.
Most Monetary Policy Committee (MPC) members also expected to cut Bank Rate again this year to a rate "close to, but a little above zero", if the economy performed as poorly as forecast.
"Following the United Kingdom's vote to leave the European Union, the exchange rate has fallen and the outlook for growth in the short to medium term has weakened markedly," the central bank said in its quarterly Inflation Report.
Bank of England Governor Mark Carney he had acted because the economic outlook had changed markedly following the Brexit vote.
"By acting early and comprehensively, the MPC can reduce uncertainty, bolster confidence, blunt the slowdown and support the necessary adjustments in the UK economy," he told a news conference.
"The Bank continues to stand ready to take whatever action is needed to achieve its objectives for monetary and financial stability as the UK adjusts to new realities, and moves forward to seize new opportunities, outside the EU," Carney said.
Finance Minister Philip Hammond welcomed the rate cut and said he and Carney had "the tools we need to support the economy as we begin this new chapter and address the challenges ahead".
Policymakers were not completely united on how to respond to the fallout from Brexit. The cut in Bank Rate and the measure intended to ensure banks passed it on to consumers - known as the Term Funding Scheme (TFS) - gained unanimous support.
But three policymakers - Kristin Forbes, Ian McCafferty and Martin Weale - opposed raising the target for quantitative easing government bond purchases to STG435 billion from the STG375 billion total reached in late 2012.
Forbes also opposed the purchases of corporate debt - something the BoE did briefly after the financial crisis, but more to aid market functioning than to boost growth.
Many economists had expected Forbes to oppose a rate cut after she said last month that the central bank should not panic and instead wait for more data on the scale of Britain's economic slowdown.
Daniel Mahoney of the Centre for Policy Studies pointed to the inflationary effect of the BoE's easing measures.
"The Bank's further loosening of monetary policy could prove problematic for the UK economy. The falling pound means that inflationary pressures are already building up, and today's decision will exacerbate them," he said.
While many business surveys show Britain's economy has slowed sharply and may even be entering recession, it is too soon for official data on how the EU vote is affecting output.
The BoE left its forecast for growth this year steady at 2.0 per cent, as the economy expanded faster in the first half of 2016 than it had expected in May.
