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.

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.

Interest rates have been cut for the second time this year, by a quarter of a percentage poi, but mortgage rates are still set to rise in a blow to homeowners. The Bank of England reduced the base rate from 5 per cent to 4.75 per cent on Thursday, following a 0.25 percentage-point cut in August, which was the first drop in four years.