MALAISE PUTS BRAKES ON RATE HIKES

THE Bank of England is now expected to keep interest rates on hold next week amid renewed turmoil in the banking sector.

Traders had pencilled in at least a quarter-point rise in the cost of borrowing, from 4pc, when the Monetary Policy Committee meets. But the collapse of Silicon Valley Bank in the US has raised concerns about the stability of the financial system, causing bank shares to tank.

Credit Suisse led the sell-off, losing 24pc of its value and hitting an all-time low after its biggest shareholder said it wouldn’t put any more money in. Banks around the world also fell as investors focused on lenders’ ability to absorb further interest rate rises.

‘When confidence is punctured, contagion can be rapid,’ said analysts at credit ratings agency Moody’s. ‘An inflation shock and rapid reversal in monetary policy in the US and Europe will likely have further consequences for the financial sector.’ Only a few days ago a quarter-point rate rise was seen as ‘nailed-on’.

Traders are betting there is now just a 45pc chance of such a move. Experts say the prospect of easing inflationary pressure will encourage the Bank of England to pause its rate rises.