The Bank of England’s decision to take the interest rate down to an all-time low of 0.5 per cent is bad news for savers, according to a building society chief.

Savers face another blow to their income after the Bank’s Monetary Policy Committee cut the rate to the lowest it has been since the Bank was founded in 1694.

At the same time, the Bank announced a £75 billion package of measures involving the purchase of assets such as bonds and gilts, mainly through the printing of money - so-called quantative easing.

Mike Lazenby, chief executive of Kent Reliance Building Society, based in Chatham, said it was bad news for savers, especially elderly investors on fixed incomes who relied on interest to live on. "It’s going to make it really hard for them," he said.

"It won’t necessarily have any impact at all on the cost of a mortgage. With fewer people having an incentive to save there will be less money coming through from normal retail supply and wholesale supply will dry up because the Government is bringing in new regulations for financial institutions about what they can and cannot count as liquidity."

He added: "It’s bad news for savers, it’s bad news for mortgage customers, it’s definitely bad news for all those financial institutions that are not owned by the Government."

It was a desperate meausure because the Bank did not know what else to do to get the country out of the economic crisis. But Mr Lazenby did not expect the rate to fall further and thought 0.5 per cent would be "the floor."

Mr Lazenby said Kent Reliance would be looking at the numbers but hoped to hold interest rates to savers at present levels. He forecast that borrowers on standard variable rate mortgages would see very little change.

Borrowers have enjoyed record falls in the cost of servicing loans, but the full reduction has not been passed on to them by all lenders.

The Bank said that world activity continued to weaken, reflecting both depressed confidence and the persistent problems in international credit markets.

In the United Kingdom, output had dropped sharply and credit conditions for companies and households remained tight.

It said that inflation was likely to fall below the two per cent target by the second half of the year, reflecting diminishing contributions from retail energy and food prices and the impact of the temporary reduction in Value Added Tax.

It added that because the latest base rate cut would by itself still leave a substantial risk of undershooting the inflation target, the MPC decided to boosting the supply of money and credit.

It was therefore financing £75bn of asset purchases over the next three months. Part of that sum would finance the Bank of England’s programme of private sector asset purchases through the Asset Purchase Facility, intended to improve the functioning of corporate credit markets. It would involve the purchase of gilts.

In a letter to Chancellor of the Exchequer Alistair Darling, Bank governor Mervyn King said: "In these highly uncertain times, there are merits to stimulating the economy through a variety of different channels.

"Accordingly, it would be beneficial if the facility could also ese central bank money to purchase high-quality private sector assets to improve liquidity in credit markets that are currently not functioning normally."

Mr Darling said he was willing to authories the MPCV to use the asset purchase fasilcity to purchase UK Government debt on the secondary market as well as the full range of private sector assets."

Printing money - or asset purchase facility - is a controversial process because it brings echoes of failing regimes propped up by printing money and triggering spiralling inflation, such as has been seen in Zimbabwe or the Weimar Republic in pre-war Germany. However, it has been done successfully in Japan - but there is no certainty that the process will work.