The Bank of England Governor yesterday warned there was now ‘considerably more doubt’ about further interest rate cuts – in a blow to millions of borrowers.

Andrew Bailey told MPs that while he continued to expect rates to come down it was harder to say when that would happen – after inflation rose more quickly than expected.

And he appeared to endorse traders betting there will be no further cuts this year, saying the Bank’s message ‘has been understood’ by markets.

The Bank’s monetary policy committee (MPC) cut its benchmark rate from 4.25 per cent to 4 per cent last month but markets are not pricing in another quarter-point cut until the spring.

The British Chambers of Commerce (BCC)’s latest forecast predicted no further rate cuts this year and just two in 2026 ‘given a pick-up in inflation’.

Vicky Pryce, chairman of the BCC economic advisory council, said: ‘The spectre of inflation is set to loom over the economy for some time, with consumers reluctant to spend. That’s likely to slow the path of interest rate cuts.’

Inflation rose to 3.8 per cent in July, the highest level in 18 months, as Britain endures the steepest price rises of any of the G7 advanced economies.

Last month the Bank predicted inflation would climb to 4 per cent this year – double the 2 per cent target level.

The nine-member MPC was split between those wanting to leave rates on hold to try to keep a lid on price rises, and those who judged that inflation still looks set to come down, especially with the jobs market expected to weaken.

Rate-setters voted 5-4 for a cut. But, in evidence to the Treasury select committee yesterday, Bailey poured cold water on hopes of further cuts soon, saying: ‘Although I

think that the path will continue to be downwards gradually over time... there is now considerably more doubt about exactly when and how quickly we can make those further steps.

‘That’s the message I wanted to get across. Now, I think actually, judging by what’s happened, certainly to market pricing since then, I think that message has been understood.’

Announcing plans to hold a Budget on November 26, Rachel Reeves said inflation was still too high, having risen from 1.7 per cent in September last year. ‘Cost of living pressures are still real,’ she conceded.

‘And we must bring inflation and borrowing costs down.’

Bailey (pictured) played down the significance of a recent bond market sell-off as long-term Government borrowing costs hit a 27-year high.

He said the recent surge in yields on UK bonds – known as gilts – was seen across global developed economies, and suggested ‘dramatic commentary’ of the rise was overblown.