Further cuts to the interest rate would be “irrelevant”, economists have warned ahead of the Bank of England’s base rate announcement tomorrow.

The Bank of England has slashed the interest base rate from 5.75 per cent in October to the current 1.5 per cent and analysts are expecting another 0.5 per cent cut on Thursday.

The policy of reducing the base rate has helped so far, with National Institute of Economic and Social Research (NIESR) estimating the co-ordinated one per cent in October boosted UK economic growth by one per cent.

However, economists at NIESR said interest rate cuts have gone as far as they can and the Bank should start buying up assets as soon as possible.

“Cutting the interest rate is irrelevant,” said Martin Weale, NIESR director.

“Supporting the corporate bond market means the market will work better and businesses will be happier about borrowing. This intervention is much more important.”

Firms seeking credit can issue new shares, sell bonds, or borrow from banks.

But as lending to businesses is now seen as more risky, selling bonds has become more expensive for companies, while their worth to banks who already hold them has fallen sharply.

If their value could be supported, banks would immediately receive a boost to their balance books and companies could raise money more easily.

Howard Archer, from Global Insight, said reducing interest rates to one per cent “will make some overall difference, although obviously credit conditions are so tight this will be limited”.

However, Dr Archer added buying up assets and cutting the interest rate did not have to be “mutually exclusive” and the Bank should be doing both.

Last week, the government gave the Bank of England the go-ahead to start buying “high quality” assets, initially focusing on purchases of corporate bonds and commercial paper.

However, this is not deemed as quantitative easing as the purchase is funded by the sale of Treasury bills.

George Osborne, conservative shadow chancellor, on Monday at a Reform conference, said quantitative easing should not be excluded.

“Quantitative easing should be the last resort. You cannot rule it out, but a last resort.”

He warned any use of quantitative easing would see a transfer of power to the Treasury on monetary policy.

“Darling will be given the power to pull the trigger.”

He added the flow back to the Treasury created “all sort of risks” and for institutional arrangements for quantitative easing must be clear.