Chancellor Rachel Reeves welcomes the cut, but says she is "under no illusion about the scale of the challenge facing households".

The central bank said future cuts would be gradual amid higher inflation forecasts after the new government introduced spending and tax increases in its budget.

The Bank of England has cut interest rates to 4.75 per cent after inflation fell to a three-year low in September. The eight-to-one decision to cut the base rate by 0.25 percentage points was in line with the expectations of economists polled by Reuters.