The central bank was expected to take the chop to rates but not to this extent.
Richard Lambert, CBI Director-General, describes the move as "bold and welcome".
He says: "Business and consumer confidence has been deteriorating sharply in recent months, and recession has replaced inflation as the major threat to the economy over the next year or two.
"This cut of a full percentage point should help to ease conditions in the credit markets, and allow banks to pass the benefits on to their customers."
Charles Stanley chief economist Edward Menashy notes: “There is a growing feeling that the MPC has misjudged the severity of the recession and is therefore behind the curve.”