Rate cut looms as calm is restored

Hopes of an early cut in interest rates after the Northern Rock crisis leapt yesterday as inflation took a surprise tumble and the US made an aggressive reduction in its rates by half a point.

As the run on Northern Rock appeared to have all but petered out, the odds of early relief from dearer borrowing costs for Britons under financial pressure rose sharply. Across the Atlantic, the Federal Reserve, America’s central bank, led the way last night as it moved to boost a faltering US economy.

The move boosted expectations that the Bank of England will soon follow suit to shore up Britain’s badly shaken economy.