LONDON (Reuters) - The Bank of England cut interest rates by half a percentage point on Wednesday in an emergency move in conjunction with other major central banks to ease the pain of the worst financial crisis since the Great Depression.

The unscheduled cut to 4.5 percent was the biggest in seven years and only the second time the BoE has moved interest rates outside of its regular monthly cycle since the central bank was made independent in 1997.

It followed the government pledging to put in as much as 50 billion pounds to bolster banks' balance sheets after weeks of market mayhem that has wiped out half the value of some of Britain's biggest financial institutions.

Stock markets rose on news of the rate cuts in Britain, the United States, euro zone, Sweden, Switzerland, Canada and China, with the FTSE-100 index of leading shares cutting heavy losses to trade flat on the day at 11:52 a.m.

The BoE said it still expected to see inflation top 5 percent in the coming months, more than double the 2 percent target, but the financial market troubles had exacerbated the chances the economy could be headed for a very severe downturn.

"The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability," the BoE said in a statement.

Economists said further rate cuts were likely as the economy had already ground to a halt even before the year-old credit crisis tightened its grip in the last month.

"We expect the Bank of England to cut interest rates by a further 25 basis points in both November and December, taking them down to 4 percent by the end of this year," said Howard Archer, economist at Global Insight.

"Furthermore, we would not rule out deeper cuts if there is no easing in the financial sector problems. We also expect interest rates to come down to 3.00 percent in 2009."