Hugh Pill, the Bank of England's chief economist, said there was “room for further cuts” in the benchmark interest rate if the Bank of England avoided a temporary inflationary hit from the Budget.
Pill, a member of the rate-setting Monetary Policy Committee, spoke at a briefing for businesses yesterday after the central bank cut the policy rate by 0.25 percentage points to 4.75%. 
But the MPC minutes warned that the Budget announced by Chancellor of the Exchequer Rachel Reeves last month, which will spend around £70bn over the next five years, will push up inflation next year.
The agency expects quarterly economic growth a year from now to be 1.7%, compared with the 0.9% forecast in August.
However, this would mean inflation would be 2.7% instead of 2.2%, and it would take an extra year, until early 2027, for the cost of living to return to the 2% target.
But Pill argues that this is only a temporary boost to inflation, as much of the government's spending is spent in the first two years of Congress.
“To a large extent, we need to scrutinize and interpret[the budget]in a way that gives us a good idea of the more permanent factors underlying inflation. These factors are the ones that really drive inflation. We need to make an impact.” We focus on what is driving our policy decisions. ”
The UK is “still in a disinflationary process”, he said.
He further added: “We are not quite there yet, but we are making progress. The fact that we are making progress means there is less need for restrictions in monetary policy.”
But Mr Pill said the pace of the UK economy could be at risk if the election of US President Donald Trump were to impose trade tariffs between developed countries.
He added: “As a small, open economy, the UK is vulnerable to these types of shocks and disruptions to the global economy.”
The central bank said yesterday that any interest rate cuts over the next year would be “gradual”.
However, in response to the proposed budget, the city has reduced its forecast for next year's rate cuts to two to three.
This is in contrast to previous market expectations of a four-quarter point rate cut in 2025.
