Rates are currently at 4.75%, but traders have bet on a cut to 4.5% in February, after inflation, which measures the rate prices rise at over time, unexpectedly fell last month.

The Bank of England watches the pay and jobs data closely when making decisions on interest rates. The latest ONS figures estimated that average weekly earnings in the UK hit £660 in November, when inflation was 2.6% – the latest figure is 2.5%.

“Pay hasn’t put this much clear blue water between itself and inflation for around three and a half years, so the difference is palpable. It’s leaving us with more money at the end of the month,” said Sarah Coles, head of personal finance at Hargreaves Lansdown.

Ms Coles warned there was a risk rising wages could lead to higher inflation and interest rate cuts being delayed, but added “on balance, the lack of growth in the economy, and a month of falling inflation, are likely to mean a rate cut in February is still on the cards”.

Ashley Webb, UK economist at Capital Economics, added some of the Bank’s policymakers “may be worried” by the resurgence in private sector pay growth, but said he suspected most of them would look at signs that the labour market was “loosening”, and cut rates.

The UK’s unemployment rate was estimated to have ticked up to 4.4%, while the estimated number of vacancies dropped 2.9% to 812,000 from October to December, continuing the decline but still remaining above pre-Covid pandemic levels.

The ONS advised treating its jobs market figures with “caution”, due to questions over the relatability of the data caused by low response rates to its survey.