In a recent appearance before a committee of MPs, Mr Bailey indicated the possibility of interest rate cuts even before inflation reaches the 2% target. The bank forecasts a decline in inflation to 2% in the spring from the current 4%, attributed to the expected decrease in high energy prices.

Financial markets have factored in the potential for up to four interest rate cuts this year as inflation recedes and the cost of living pressure eases. Despite recent data from the Office for National Statistics indicating a 0.3% contraction in the economy in the last quarter of the previous year, pushing it into a technical recession, Governor Bailey highlighted resilience in the labour market and improving household incomes, Daily Business reports.