Hopes that the Bank of England will slash interest rates have been undermined after a key policymaker hinted that the Bank's rescue plan for credit markets will free it up to use rates to fight inflation. Daily Telegraph

The pound closed in on the $2 mark after Tim Besley’s hawkish speech in London stirred fears that Britain is heading towards stagflation, with sluggish growth and high inflation striking the economy simultaneously.

In a further sign of the chaos the financial crisis is causing in the City, the Bank confirmed yesterday that it is postponing its Financial Stability Report for a week – one of the first times since independence that it has been forced to delay a key publication.