Of the quartet of blue chips announcing disappointing results yesterday, only one was due directly to the slowdown in the general economy. BT's difficulties were down to the freeing up of its once monopolistic market position. GlaxoSmithKline's are because of adverse side effects of one of its blockbuster treatments. Rolls-Royce's share price punishment was in response to its decision to opt for a more cautious husbandry of its cash.

Only Yell, the company behind Yellow Pages, complained of being directly hit by the deteriorating economy. It reports a slowdown in UK customers buying entries in its directories. The impact on its revenues thus far has been modest. But it sent a shudder through the markets. Yellow Pages adverts, after all, are the marketing lifeblood for many small firms - and usually one of the last items of expenditure to be cut when times get tough.

The slide in the stock market yesterday was therefore not just about economic worries. Nevertheless, share prices are now being hit by worries about the likely impact of the worsening of business and consumer confidence, and the drying-up of credit that has fuelled so much demand in the past.

The Bank of England has the difficult task of judging how much and how quickly the undeniable surge in inflationary pressures will be damped back down again by slowing demand and the freeing up of spare capacity. The recent slide in sterling, which boosts import prices, has made it an even harder decision.

Yesterday's quarter point cut to 5.25 per cent looks a fair call, however. The hawks will argue that any loosening of policy when inflation is picking up is reckless. But the response to that is that a neutral level for base rate is probably in the 4.5 to 5 per cent range. Even now the Bank is applying more brake than throttle.

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