Borrowing costs are expected to fall further this week as the Bank of England prepares to respond to signs of a slowing economy and rising joblessness.

Most economists believe the Bank’s Monetary Policy Committee (MPC) will reduce interest rates by 0.25 percentage points to 4% on Thursday. A cut would offer some relief to mortgage holders and may lead to more competitive lending rates across the market.

The Bank has been gradually lowering rates from a peak of 5.25% as inflation has cooled and economic pressures have mounted.

Recent data from the Office for National Statistics (ONS) showed that unemployment rose to 4.7% in the three months to May, the highest level in four years. Meanwhile, average earnings growth excluding bonuses eased to 5%, its lowest rate in nearly three years.

Earlier this month, Bank of England Governor Andrew Bailey said the central bank would be prepared to cut rates if labour market conditions continued to weaken.

The UK economy also shrank in both April and May, further strengthening the case for a rate cut.

Andrew Goodwin, chief UK economist at Oxford Economics, said another 0.25 percentage point reduction was the most likely outcome. “With pay growth continuing to cool and Bank rate still well above neutral levels, it would be a major surprise if the MPC didn’t act on August 7,” he said.

However, Goodwin added that the Bank was unlikely to accelerate the pace of future cuts, particularly as the rate of job losses has started to ease.

Some committee members may also remain cautious after inflation rose at its fastest pace in 15 months in June, with food prices among the key contributors.

Barclays UK economist Jack Meaning said he also expects a cut to 4%, but warned of a possible three-way split among the MPC’s nine members. “We see two members voting to hold at 4.25%, and two pushing for a larger 0.5 point cut,” he said.

Meaning added that the absence of a clear signal in recent economic data is likely to lead the majority of committee members to favour a gradual, cautious approach to further rate changes.