The FTSE 100 continued its slow decline from the top of its recent trading range, with telecoms dragging the market lower.

After surging almost 10 per cent over the previous fortnight, Footsie dropped 2.8 per cent over the week as investors balked at taking prices higher until the interest rate picture became clearer.

Although the Bank of England left rates on hold this week, some economists still think the recent decline of sterling will prompt further rate rises in coming months.

"With sterling undermined by rising external interest rates plus the worsening UK current account, the disinflationary squeeze on retail goods prices will gradually ease," said Mr Michael Saunders, UK economist at Schroder Salomon Smith Barney Citibank. "As a result, base rates will probably need to rise a long way over the next 12-18 months to slow domestic demand and wage growth enough to keep inflation on target."

The international interest rate picture also remains uncertain. The European Central Bank raised rates by half a percentage point on Thursday and more increases are expected. And, despite recent US rate optimism, Goldman Sachs sees the Federal Reserve pushing rates up to 7.5 per cent by the middle of next year.

Footsie was lower for much of a rather subdued trading session yesterday, with only 1.3 billion shares traded by the 6 p.m. count. The blue-chip benchmark was dragged lower by telecom giants Vodafone AirTouch and BT and by Sage, the accountancy software group hit by a profit warning from its US rival, Great Plains.

There were no big gainers among the blue chips with old economy stocks enjoying the best performances.

At the close, Footsie was 52.8 points down at 6,443.8, just above its low for the day. The high for the day was 6,512.4.

The poor performance of Sage weighed on the Techmark 100 index, which dropped 54.39 to 3,482.04. But the medium and smaller sized stocks held up against the trend. The FTSE 250 gained 12.1 to 6,495.4 while the SmallCap advanced 7.4 to 3,300.0.

There was little in the way of decisive guidance from other markets. Gilts were modestly higher while sterling was little changed on the day.

Next week may prove more lively for the UK market as a raft of economic data including producer prices, retail prices, average earnings and retail sales is released.