The Bank of England has cut interest rates to a new record low of 0.25%, after more than seven years at the previous record low of 0.5%.
All nine of the Bank's Monetary Policy Committee voted in favour of cutting rates.
The MPC also voted in 6:3 in favour of increasing the Bank's quantitative easing programme by £60 billion to £435bn. The Bank also announced a two new economic stimulus schemes - a £10bn high grade corporate bond buying fund and another worth a potential £100bn.
The governor of the Bank of England, Mark Carney, described the measures outlined as an "exceptional package".
He added: "The UK can handle change, it has one of the most flexible economies in the world."
On Twitter, Chancellor Philip Hammond welcomed the news.
I welcome the decision of the MPC today. The vote toleave EU has created uncertainty which will be followed by a period ofadjustment— Philip Hammond (@PHammondMP) August 4, 2016
As the shape of new relationship with EU becomes clear it’s right that monetary policy is used to support our economy — Philip Hammond (@PHammondMP) August 4, 2016
That’s why I authorised the Governor’s request for an increase in asset purchases & new scheme to support lending https://t.co/DFJIjrGnRe — Philip Hammond (@PHammondMP) August 4, 2016
Many economists had predicted the MPC to cut rates only, leaving QE on hold to give it more options later in the year. Commentators are now describing the decision to cut rates, increase QE and introduce two new schemes as 'throwing the kitchen sink' at monetary stimulus.
But the Bank isn't done. It is adamant that it can, and will, do more in order to stimulate economic growth. "This package contains a number of mutually reinforcing elements, all of which have scope for further action," it said.
Mark Carney said: "If the [economic] data is as projected, the majority of MPC members would anticipate a further rate cut."
In the Bank's monthly Inflation Report, it forecast that the UK economy would narrowly avoid a recession by the end of the year, maintaining its previous estimate of 2% for the year as a whole.
The Bank expects growth of 0.8% in 2017, down from previous estimates of 2.3% - it is the single largest downgrade made by the central bank since it started the Inflation Report.
The FTSE 100 jumped by around 50 points as the news broke, while the value of the pound fell more than 1.1% to $1.31760 against the US dollar.
On Wednesday, it was all but confirmed that the Bank would cut rates after news of a significant slowdown in the UK's vital services sector. The Markit/CIPS Purchasing Managers' Index (PMI) for the industry scored 47.4 in July - down from 52.3 a month earlier. That was the single largest month-to-month drop in the services PMI score since the survey was started in 1996.
Our economics editor, Michael Baxter, analyses what today's announcement means.
Jeremy Cook, chief economist at World First, said the Bank of England is getting ready for a "street fight" with ailing economic growth.
He said: "While its first set of forecasts post-Brexit do not see the UK economy falling into a recession but they are sufficiently moved to loosen policy by more than markets had initially thought. There had been some doubts in the past few days that the data picture may not have given the Bank enough insight for them to begin a policy of stimulus. These were wrong and the combination of interest rate cuts, quantitative easing spending, including a corporate bond buying program, and a new funding scheme for banks make this a policy toolkit that is set to dig the UK economy out of any mire it may fall into as quickly as possible.
"Six members of the MPC are treating the battle against a post-Brexit slowing of the UK economy like a street-fight; hit them first, hit them hard and make sure they don’t want to get up. This is that first punch.”