The rumours were triggered by Thursday's unusual decision by the US Federal Reserve to cut US rates prior to its regular meeting. A spokeswoman for the Bank of England said: "No emergency MPC meeting has been called today [Friday]." However, the Bank added there was "nothing to stop" the MPC meeting "as and when they like", prompting dealers to speculate there could still be a rate cut before November 5, the date when the MPC is next scheduled to make a rate announcement .
Under the terms of the Bank of England Act, Eddie George, Bank governor, may call an MPC meeting "at any time on giving such notice as in his judgement the circumstances may require". MPC meetings - which have to be held "at least once a month", according to the Act - require a quorum of six of the nine-strong committee to be present.
The meetings can, if necessary, be conducted over the telephone. The pound approached DM2.74 at one point yesterday, a drop of over 2 pfennigs, before regaining ground to close down 0.5 pfennigs at DM2.7624.
London stocks initially responded well to the surprise decision of the US Federal Reserve to lower two key interest rates in advance of its next scheduled interest rate meeting.
The FTSE 100 hit a high of 5208.1, up 151.8 points, in early trade after the Fed cut both its funds rate and its discount rate by 0.25 percentage points citing "growing caution by lenders and unsettled conditions in the financial markets".
However, the index fell back in afternoon trade on speculation that the Fed's move was prompted by worries over the financial health of a hedge fund or a bank. Stephen Lewis, chief economist at Monument Derivatives said: "The markets are apprehensive that the Fed's move will turn out to be pre-emptive, ahead of the publication in the days ahead of some major problem in a hedge fund or bank".
Carl Weinberg, chief economist at High Frequency Economics, said: "Our theory is that something awful is about to happen in Japan. Or maybe another hedge fund is about to fold and take out a money bank in the process. "
US stocks, which closed up 330 points on Thursday, recorded more modest gains in early trade yesterday. At lunch-time, the Dow Jones Industrial Average was up 47.12 points at 8346.48.
Separately, the Office for National Statistics, said the public sector net cash requirement - the new name for the public sector borrowing requirement - was pounds 1.6bn in September, less than market expectations. The government is now on course to achieve a comfortable fiscal surplus this year.