LONDON - THE Bank of England was widely forecast to slash British interest rates on Thursday in a bid to prevent a long and painful recession amid a growing global financial crisis, analysts said.

Most economists predict the BoE's monetary policy committee (MPC) to reduce borrowing costs by a quarter or even a half point, that would take the key lending rate to 4.75 or 4.50 per cent, after a two-day meet that begins on Wednesday.

Around the world, central banks are concentrating their firepower on the looming threat of recession and the widening impact of the global financial crisis, as lower commodity prices ease worries about rising inflation.

'The world has changed rapidly over the past few weeks and we now expect the MPC to cut the official bank rate by 25 basis points to 4.75 per cent,' said Investec Securities economist Philip Shaw.

'The pace of change in the financial landscape over the past three weeks has been frightening and has spread well outside the confines of the US.'

This week's British rate call is set against the backdrop of market chaos that last month sparked the demise of US investment bank Lehman Brothers and British home loan provider Bradford & Bingley.

Australia sprang a surprise interest rate cut on Tuesday in the face of global financial panic, sparking speculation about a coordinated international drive to lower borrowing costs and avert economic meltdown.

The Reserve Bank of Australia (RBA) shocked markets by slashing rates by 100 basis points to 6.0 per cent.

However the Bank of Japan held its key rate at 0.5 per cent on Tuesday and dampened talk of a coordinated plan.

The European Central Bank left eurozone borrowing costs unchanged at 4.25 per cent last week and the US Federal Reserve kept American borrowing costs on hold at 2.0 per cent in September.

Central banks' priorities are moving rapidly away from controlling inflation towards supporting growth and averting a deeper economic and financial crisis,' said Capital Economics analyst Alvin Pontoh.

'Central banks in the United States and Europe - where the growth outlook is markedly worse than in Australia - will be left with little choice but to follow the RBA's lead in the days and weeks ahead.'

Federal Reserve chairman Ben Bernanke hinted on Tuesday that it would cut interest rates as the outlook for economic growth in the United States worsens.

Britain's economy experienced zero growth in the second quarter compared to the first three months of 2008, according to official data.

The 0.0-per cent quarterly growth rate, the weakest performance for 16 years, leaves Britain perilously close to a recession - which is defined as two successive quarters of negative economic growth.

'It is time for bold action from the Bank of England,' said Global Insight economist Howard Archer.

'With the economic downturn deepening, money markets frozen, equity prices tumbling and the risk of prolonged, serious recession seemingly growing by the day due to the serious financial sector problems, we now expect the Bank of England to cut interest rates by 50 basis points.'

Meanwhile, British 12-month inflation hit a fresh 16-year high of 4.7 per cent in August on the back of soaring domestic electricity and gas bills, and high food prices.

The annual inflation rate held above the BoE's 2.0-per cent target for the tenth successive month.

Major central banks, including the BoE, meanwhile continue to pump billions of dollars into money markets on a daily basis amid a worldwide credit squeeze that began in August 2007 with the collapse of the US subprime home loan sector.

The MPC has left its key interest rate unchanged at 5.0 per cent for the past six months as it sought to tame sky-high inflation fuelled by soaring domestic energy, food and oil prices. -- AFP