He said: "This first cut of 2008 – from 5.5 per cent to 5.25 per cent – provides a welcome boost to farmers at the beginning of what will be a challenging year for many in the agriculture sector.

"During the last 12 months, farmers have experienced volatile financial conditions, producing both winners and losers. Those in cereals and dairy have profited from high prices of grain and milk, although suffered increasing costs of both fuel and fertiliser. Livestock farmers have been threatened with yet more diseases and difficult market conditions, including high charges for grain and fuel.

"This cut in interest rates, bringing down the cost of running businesses, will help relieve some of the pressures currently facing farmers. However, the combination of a cooling economy and high inflation risks, caused by factors such as increasing oil prices, could mean fewer interest rate cuts in the year ahead than previously expected."