Up to 0.5 percent might be slashed from the bank rate later this week due do the "extreme economic crisis".
Economists continue to weigh in on the Bank of England's potential reduction of interest rates later this week.
The rapidly worsening credit crunch has led to more and more analysts expecting action from the central bank, with most forecasting a 0.25 percent reduction aimed at stimulating the mortgage market.
A poll conducted by news agency Thomson Reuters early last week found that just 21 of 66 economists were predicting such a cut. However, this number had swelled to 49 in 62 by Friday, as conditions worsened.
Yesterday, the markets suffered the worst day's trading in decades. The flagship FTSE 100 index dropped 391 points, or 7.85 percent, the largest ever one-day points drop measured on the exchange.
By lowering the rate at which it lends to other banks, the Bank of England hopes that these firms will then pass on the reductions to customers - in the form of cheaper mortgage loans. However, with many banks severely rattled by the market turmoil, it is highly doubtful whether such a cut would be passed on in full, if at all.
Speaking to the Financial Times Michael Saunders, an economist at Citigroup, said that he expected a 0.5 percent reduction due to "the scale of the financial crisis and the severity of the downturn".
He added: "We are at the point of extreme economic crisis."
Simon Ward at New Star was more cautious and predicted a 0.25 percent cut. "Current economic risks stem less from the price of money than the complete breakdown in the plumbing of the financial system, a problem better addressed by direct official intervention, including the Bank of England intermediating money and credit flows," he commented.
The Bank is scheduled to announce its rate decision on Thursday.
Compare loans via money.co.uk
