The FTSE 100 jumped to its highest level since May as investors cheered the prospect of earlier interest rate cuts.

Britain’s blue-chip index rose 1pc on Tuesday to close just shy of 7,750 points after jobs market data showed a fall in vacancies and a slowdown in wage growth.

The latest data is likely to embolden Bank of England policymakers as they debate when to bring interest rates down from their 16-year high of 5.25pc.

The prospect of lower borrowing costs encouraged investors to pile into UK stocks with gambling company Entain, insurer group Beazley and JD Sports, among the biggest risers.

Prudential also edged over 3pc, with fellow Asia-focused financial services giant HSBC not far behind, following a strong performance by Chinese stocks.

Victoria Scholar at Interactive Investor said: “Wage growth, although weakening slightly, remains relatively robust which may not be enough for the Bank of England,” she said.

“The central bank has made it clear it wants to see significant evidence that pay growth is slowing before cutting interest rates. Nonetheless it still looks like a summer rate cut is on the cards.”

Markets expect the Bank of England to cut rates in June, followed by a series of further cuts to bring its base rate to as low as 4.25pc in a year’s time.

Officials, led by Andrew Bailey, the Governor, are particularly worried about wages because they want services price growth to fall further before they can feel confident rampant inflation has been fully defeated.

Inflation has fallen from a peak of 11.1pc in October 2022 to 4pc in January. But much of this has been driven by energy costs and internationally traded products, with goods price inflation down to 1.8pc.

By contrast, prices in services, which offer a better track of inflation in the domestic UK economy, are still up by 6.8pc on the year.

As a result, a slowdown in pay growth raises hopes the Bank may be able to act sooner rather than later.

Separately on Tuesday, official US data showed inflation was higher than expected in February.

Prices rose by 0.4pc between January and February and are up by 3.2pc on the year, according to data from the Bureau of Labor Statistics.

Both of those figures were a touch higher than January’s inflation numbers.

Core inflation, which strips out food and energy, fell from 3.9pc to 3.8pc, but that is above the 3.7pc which economists had predicted.

As a result, Greg Wilensky at Janus Henderson Investors said the chance of a quick rate cut from the Federal Reserve is fading.

“This report means that a May rate cut has likely been removed from the Fed’s menu,” he said.

“I still see June as the most likely month for the first cut, but this could shift to July if the inflation data does not start to improve next month.”

Read the latest updates below.