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

Barclays expects the Bank of England to hold interest rates at its December meeting, revising its prior forecast of a cut, citing the central bank's cautious tone that emphasized uncertainty and gradual policy moves.