Campaigners warned there could be business failures and job losses if companies do not raise prices above inflation.

London’s top index moved 0.89%, or 68.24 points, lower to finish at 7,499.6.

Interest rates were lifted to 4.25% from 4% in what economists think could be the final time that interest rates go up.

The Bank of England’s Monetary Policy Committee voted seven to two to increase rates from 4% to 4.25%.

Economists are pencilling in a rise to 4.25% from 4% following official data showing a surprise jump in inflation to 10.4% last month.

The Bank of England insisted that the UK’s banking system is resilient but cautioned over its exposure to wider turmoil.

London’s FTSE 100 had a bumpy start to the day but managed to make gains in the afternoon, closing 0.41% higher.

The unexpected jump in UK inflation in February could make it harder for the Bank to justify pausing its prolonged cycle of rate hikes, say experts.

The FTSE 100 jumped by about 2% at one point during the day, and closed 132.37 points higher, or 1.79%, at 7,536.22.

Tuesday’s resurgence came as Jeremy Hunt sought to reassure UK investors and businesses.

US stock markets opened higher after the Treasury secretary signalled the Government would protect people’s deposits if another bank collapsed.

The move means its entry-level rates will be just above the new national living wage, coming into effect from April 1.

Swiss bank UBS said it plans to run down the investment bank division of Credit Suisse as part of its merger plans.

Law firm Quinn Emanuel said it had put together a team of lawyers from Switzerland, the US and the UK to represent the aggrieved investors.

London’s FTSE 100 closed 74.63 points lower, or 1.01%, at 7,335.4.

Some economists think the Bank will opt to raise rates for the final time on Thursday amid concerns over global financial stability.

The lawsuit accuses the Swiss bank of giving ‘materially false and misleading’ public statements.

The Scotsman and Yorkshire Post publisher said it wants to be digital, but stuck by its local newspapers.

Two events have fuelled the sense of panic over the banking sector this week.

London’s leading index sunk by more than 300 points at one point on Wednesday and closed 3.8% lower.