Hopes of an early cut in interest rates after the Northern Rock crisis leapt yesterday as inflation took a surprise tumble and the US made an aggressive reduction in its rates by half a point.

As the run on Northern Rock appeared to have all but petered out, the odds of early relief from dearer borrowing costs for Britons under financial pressure rose sharply. Across the Atlantic, the Federal Reserve, America’s central bank, led the way last night as it moved to boost a faltering US economy.

The move boosted expectations that the Bank of England will soon follow suit to shore up Britain’s badly shaken economy. As the Chancellor and the Prime Minister anxiously await signs that the Northern Rock debacle has hit consumer confidence further, the growing prospect of an early cut in rates will greeted with relief by Labour strategists before Gordon Brown’s first party conference as leader, next week.

However, an exclusive Times poll reveals today that the Northern Rock affair has barely shaken public trust in the Government, or faith in the banks. The Populus poll, undertaken on Monday and the first on the embattled bank’s troubles, shows that the public are in a calm and optimistic mood after Monday’s move by Alistair Darling to guarantee deposits.

It carries more bad news for the Conservatives, as does an ICM poll for The Guardian today that shows Labour’s lead extending to 8 points.

While the Bank will find comfor that the run on Northern Rock seemed to be over, optimism that it will still respond with rate cuts — by Christmas — received a big boost from yesterday’s reassuring inflation figures. After falling in July from from 10-year highs above 3 per cent — set as recently as March — to just 1.9 per cent, yesterday’s August figures showed headline inflation on the consumer prices index falling further, to 1.8 per cent.

This is below the Bank of England’s 2 per cent target rate for a second month, leaving economists arguing that it now has a freer hand to cut rates if it sees this as vital to prevent an economic downturn. Mervyn King, the Bank’s Governor, will give more clues when he appears before MPs tomorrow.

MPs plan to ask Mr King how he intends to restore credibility in the banking system, and when he first alerted the Government to the likely problems at Northern Rock — a question ministers have refused to answer. MPs are also likely to focus on the part played by the Bank in the guarantee offered by the Government to savers.

The Times understands that for two weeks the Bank believed this might be necessary, although it wanted first to test the viability of the lending facility given by the Bank itself on Friday. On Sunday and Monday it was pressing for the guarantee — an option that ministers took after the crisis began to affect other banks.

In the Times poll 86 per cent of those questioned said that they had a great deal or moderate amount of confidence in their bank or building society to protect their savings. Nearly half (48 per cent) expect house prices to rise over the next year, and just 15 per cent see them falling. In the South East, even more people (54 per cent) expect house prices to rise.

Voters are optimistic about the economic outlook for them and their families, although less for the country as whole than last March.

There is more bad news for the Tories in a new ICM poll in today’s Guardian. Undertaken over the weekend it puts Labour on 40 per cent, up one point on a month ago, with the Tories two points lower to 32 per cent, and the Liberal Democrats two points higher at 20 per cent. David Cameron is also the least popular of the three main party leaders.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax