Interest rates may be put on hold as inflation is on course to fall, according to Bank of England governor Andrew Bailey.

His comments to a committee of MPs sent the pound to a three-month low and will be greeted with relief by debt-laden businesses and households.

Mr Bailey was responding to questions from the Treasury committee and said a sharp fall in inflation from a peak of 11.1% in October last year to 6.8% has diluted the need for more interest rate rises.

The Bank’s monetary policy committee (MPC) has raised the base rate 14 times in a row to 5.25%, its highest in 15 years and the most aggressive tightening cycle since the 1980s.

Following Mr Bailey’s comments sterling weakened about 0.6% against the US dollar to below $1.25, a three-month low and came amid wider concerns that continuing to hike interest rates risks pushing the economy into recession.

The Bank’s chief economist Huw Pill last week said he favoured keeping rates tighter for longer, while Ben Broadbent, a deputy governor at the Bank, told the Jackson Hole economic symposium that he too favours a “higher for longer” approach.