The United States faces almost a 40 per cent chance of slipping into recession in the next 12 months, according to the Federal Reserve's own market model.

As Fed chairman Ben Bernanke prepares to decide whether to raise American interest rates for the 18th time on Tuesday, bond prices and the high level of borrowing costs are now showing a 38 per cent chance of recession, according to a model published by Fed economist Jonathan Wright earlier this year.

After official payroll figures released on Friday showed that the economy created fewer jobs than expected last month, Wall Street began predicting Bernanke would halt the Fed's rate-hiking campaign this week. But some economists believe the central bank has already gone too far.

'They've hiked far too much,' said Ian Shepherdson of High Frequency Economics. 'The Fed has a long and inglorious history of raising rates too far, and cutting them too far.' He expects growth in the world's largest economy to have ground to a halt by the end of the year, even if Bernanke chooses to leave rates unchanged this week.

Predictions of a US slowdown came as analysts warned that the Bank of England's surprise rate increase on Thursday will cramp retail spending and wobble the vulnerable housing market - especially if consumers believe there are more rises to come. 'I wouldn't dismiss the impact of this; people have been lulled into thinking that rates don't move, and there will now be a period of reassessment,' said Jonathan Loynes, chief European economist at Capital Economics.

'A quarter percentage point is not a lot, but it's a signal,' agreed Miles Shipside, commercial director of property website Rightmove. 'Certainly if you were struggling to sell before Thursday, it won't be any easier now.'

Kevin Hawkins, director-general of the British Retail Consortium - which is expected to reveal this week that July was a relatively strong month on the UK high street - said the rise would leave retailers struggling once the 'World Cup effect' and the summer sunshine disappear. 'Later in the year we won't have the football, and we won't have this sort of weather - and if this really hits consumer confidence, I think it's going to be even harder to get any real sales growth.'

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