The Bank of England’s chief economist Huw Pill has cautioned against expecting rapid interest rate cuts this year, saying stubborn underlying inflation still needed to be tackled.

Speaking after the Bank cut interest rates by a quarter point to 4.5%, he said growth had been weaker than it had expected. It halved its 2025 forecast to 0.75% from its previous 1.5%.

Crucially, he reiterated the Bank’s warning that inflation would rise to 3.7% in the summer from its current 2.5% and said this would drive its decisions on rate cuts.

Mr Pill was one of seven of the nine-member monetary policy committee to vote for a quarter point cut also said that the damage to the economy from Rachel Reeves’s £25 billion increase in employers’ national insurance contributions (NICs) had been overstated.

He said the NICs increase “is not the main driver [of our economic forecasts], and perhaps the media, and other discussions of it, have perhaps emphasised it”.

Underlying inflation dynamics was stubborn and there was still evidence of “elevated” wage growth.

As a result, the Bank is “not in a situation where we can declare job done”, he said, adding that “we need to continue to be gradual” in cutting interest rates.

Two external MPC members, Catherine Mann and Swati Dhingra, wanted to cut the base rate by half a per cent.

The pound was unchanged against the dollar at $1.24, while the FTSE 100 dropped by 0.23 per cent after hitting a record high on Thursday.

Wall Street suffered sharp falls on Friday as investors digested a mixed January employment report as concerns grew over a trade war.

Seasonally adjusted non-farm payrolls grew 143,000 in January, well below the 170,000 expected by the market and the revised gain of 307,000 for December. However, November and December’s tallies for payrolls combined were marked up by 100,000.

While the market reaction to the jobs data was marginal, stocks sank in afternoon trade after Donald Trump said that the government would impose retaliatory trade tariffs on countries that charge additional duties on US imports.

The measures would begin as early as Monday or Tuesday, he said, without specifying which countries would be affected.

Stephen Innes, managing partner at SPI Asset Management., said: “That headline hit the tape like a lead balloon, forcing traders to hit the brakes on risk sentiment. Stocks took a sharp turn lower, erasing earlier gains as markets braced for another round of trade war drama,” said

The S&P 500 and Dow finished 1% lower, while the Nasdaq dropped 1.4%.