By Jennifer Ryan Nov. 6 (Bloomberg) -- The Bank of England unexpectedly cut the benchmark interest rate by 1.5 percentage points to the lowest since 1955 as policy makers tried to limit damage caused by the worst banking crisis in almost a century. The nine-member Monetary Policy Committee, led by Governor Mervyn King, reduced the bank rate to 3 percent, the biggest single step in more than a decade. The move was predicted by none of the 60 economists in a Bloomberg News survey. ``It's absolutely staggering and deeply impressive,'' said Brian Hilliard, director of economic research at Societe Generale in London. ``They are clearly grasping the nettle and taking deep action. Boy, this is going to have an impact.'' The seizure in credit markets has left Britain on the edge of its first recession since 1991, prompting a 50 billion-pound ($80 billion) bank rescue package from the government and a half-point emergency rate cut on Oct. 8. With the economy headed into recession, the danger is that inflation will slow more than policy makers want. ``The risks to inflation have shifted decisively to the downside,'' the Monetary Policy Committee said in a statement. Policy makers ``judged that a significant reduction in Bank Rate was necessary now in order to meet the 2 percent target'' for inflation. The pound dropped immediately after the decision before rebounding. It traded at $1.6011 at 12:30 p.m. in London compared with $1.5898 before the decision. Policy Response Global policy makers are escalating their response to the global credit crunch after a coordinated round of global cuts last month. The European Central Bank today reduced its benchmark rate by 50 basis points and the Swiss central bank unexpectedly trimmed its main lending rate by 50 basis points. The Federal Reserve last month lowered its main rate to 1 percent, matching the lowest in a half century. The Bank of England is working with the government to limit the fallout from what it calls the worst global banking crisis in almost a century. Prime Minister Gordon Brown was forced last month to broker a takeover of HBOS Plc and Bank of England figures show financial institutions in the U.S. and Europe have already suffered $2.8 trillion in securities losses from the crisis. ``They're admitting that this recession is going to be very painful and have a huge impact on inflation,'' said George Buckley, an economist at Deutsche Bank AG in London. ``This is obviously a lot of help but it remains to be seen how much gets passed through.'' Shares of Tomkins Plc fell the most in 16 years today after the U.K. maker of auto parts and building materials said markets have worsened ``considerably'' since the end of June. Bovis Homes Group Plc, the U.K.'s most profitable homebuilder, said today falling prices are hurting margins. Manufacturing is in its longest contraction since 1980, while U.K. house prices fell an annual 14.9 percent in October, the most in at least 25 years, HBOS Plc said today. Unemployment claims rose to the highest level in almost two years in September. ``There has been a very marked deterioration in the outlook for economic activity at home and abroad,'' the Bank of England said today. ``The availability of credit to households and businesses is likely to remain restricted for some time.'' To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net

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