The governor of the Bank of England reiterated his forecast that interest rates will continue to fall “gradually” as the jobs market softens.

Andrew Bailey said he was seeing signs of a softening labour market, which would help bring inflation down to the Bank’s 2% target, from its current 3.4% rate. This, in turn, would give rate-setters the confidence to lower borrowing costs.

Average wages slowed to 5.2% between February and April, according to official figures earlier this month, easing from a 5.6% increase.

However, Monetary Policy Committee members have long said they want to see wage growth fall below 5%.

But Bailey told CNBC this morning: “I think the path of interest rates will be gradually downwards, I’ve not changed my mind on that.”

He added that at the upcoming Monetary Policy Committee meeting next month, “the key question is whether the softening that we are beginning to see [in the labour market] is going to come through and create the context where inflation will come back down to target”.

Investors are betting on the Bank cutting rates in two further quarter-point moves to 3.75%, from its current 4.25%, by the end of the year.

Money markets currently indicate that there’s a 75% chance the Bank will cut interest rates, by a quarter-point next month.