With both the Bank of England and the European Central Bank (ECB) choosing to keep interest rates on hold, FC has claimed that the news will not have helped to ease uncertainty within the financial markets.

Paul Niven, head of asset allocation for the firm, said that the ECB is likely to be divided over what action to take in light of the prolonged liquidity crunch and the appreciation of the single currency .

Meanwhile in the UK, Mr Niven suggested that there will be mounting pressure for a rate cut, which may take place during the first quarter of 2008.

As a result, the uncertainty within the financial markets and information from the central banks will be monitored by investors looking to the next turnaround in monetary policy in Europe, the firm noted.

At present, the US Federal Reserve appears to be leading the way in reducing rates, he claimed, suggesting that it is now a matter of time before the other banks choose to follow.

Richard Dingwall-Smith, chief economist at Scottish Widows Investment Partnership, predicted the base rate would be trimmed to 5.25 per cent within the next six months.