The pound tumbled below $1.50 against the dollar for the first time in six years and hit a record low against the euro after the Bank of England opened the way for further cuts in UK interest rates on Wednesday.

The Bank, which last week slashed rates by 150 basis points to 3 per cent, said in its quarterly inflation report that the UK economy would contract throughout 2009 and inflation would slow and fall below its 1 per cent minimum target unless it lowered rates further.