The woes of the financial sector are likely to squeeze the wider UK economy even more powerfully than had been expected, while the other threat to growth – that from inflation – appears to be subsiding, according to Sir John Gieve, deputy governor of the Bank of England.

Speaking to a conference in London on Monday, Sir John’s remarks are likely to be interpreted as a sign that he is closer to supporting a cut in interest rates. He is a member of the Bank’s rate-setting Monetary Policy Committee and has so far not voted in favour of lower rates as the financial crisis deepened through the summer.