Wage growth has eased to its slowest pace in two years, fuelling expectations that the Bank of England will cut the base rate next month.

Pay excluding bonuses grew at 4.9% in the three months to August, down from 5.1% in the quarter to July, Office for National Statistics data shows.

The central bank’s rate-setting Monetary Policy Committee has said it wanted to see wage growth, along with services inflation, fall below 5% for most of this year.

The committee’s final two meetings this year are scheduled for 7 November and 19 December, with markets betting that it will cut the rate at least once to 4.75% from its current 5% level.

Quilter Investor investment strategist Lindsay James says: “Wage growth has been a persistent challenge for the Bank of England.

“With only a few weeks until the next Bank of England interest rate announcement, today’s figures, along with last week’s gross domestic product data and tomorrow’s inflation number, will play a vital role in the monetary policy committee’s decision-making.

“Labour’s first Budget [on 30 October] will also take place before the Bank’s Monetary Policy Committee meeting, so the Bank will closely monitor market reactions and potential economic impacts.”

Overall, the jobless rate fell to 4% in the three months to August from 4.1% in the quarter to July.

Hargreaves Lansdown head of money and markets Susannah Streeter points out: “Worrisome wage growth is in retreat, lifting expectations that borrowing costs will soon fall further.

“The rate of increase in average earnings, including bonuses, has fallen to 3.8%, a hugely significant drop given how pay growth had raced away in recent years.”

Streeter adds that the move firms up “expectations of a rate cut in November, with another follow up reduction likely in December too.”