Pressure had been growing on the Bank to cut rates in order to stimulate growth in the economy.
But many analysts had expected the Bank to hold fire this month, possibly trimming rates in August instead.
However, the Bank's Monetary Policy Committee (MPC) - which was chaired for the first time by new governor Mervyn King - decided that action was needed now.
The past few months have seen the Bank's Monetary Policy Committee (MPC) split over whether to reduce rates further.
The weakening of the pound against the euro this year has raised fears that inflation could pick up.
A fall in value of sterling makes imports more expensive and so can push prices higher, threatening the Bank's inflation target.
However, a rebound in the value of the pound in recent weeks has partly lifted this threat and cleared the way for another rate cut.