“The path is downward from here. We’ll see how quickly and by how much. I do emphasise the word gradual and the reason for that is there are a lot of risks out there in the world at large and also domestically,” he told the BBC.

Investors now do not expect any further rate cuts this year, with the Bank likely to hold rates at its next meeting in December.

Capital Economics economist Paul Dales said he now expected rates to fall slower to 3.5% in early 2026 rather than to 3%.

Inflation – which measures the pace of price rises – fell below the Bank’s 2% target in the year to September, but was always expected to rise again after gas and electricity prices rose last month.

It was then forecast to drop back to 2% by 2026, but the Bank now expects that to happen in the following year.

The Bank’s rate setting body – the Monetary Policy Committee – voted 8-1 in favour of the cut.

Catherine Mann voted to keep rates on hold citing the impact of the Budget on inflation as one of the reasons.