In the economic gloom of Labour’s first year in power, Rachel Reeves has had a reliable shred of comfort to cling to: five times since the general election, the Bank of England has cut interest rates.

This week, in all likelihood, the chancellor will get a sixth to shout about, as Threadneedle Street prepares to reduce borrowing costs in an early Christmas present that will be seized upon by the Treasury.

The view in the City is that a festive cut on Thursday is odds-on. After last week’s disappointing October growth figures, the jobs market and consumer prices data due out on Tuesday and Wednesday – before the rates decision – are expected to confirm that inflationary pressures in the UK economy are fading.

But while a cut will be good news for businesses, mortgage borrowers and the beleaguered occupants of Downing Street, attention will quickly shift to the prospects for 2026. How many more times could the central bank come to the chancellor’s rescue? Here things are a bit more complicated.

That Britain’s economy is in the doldrums should hardly come as a surprise. Continual tax speculation has sapped business confidence and household spending, while Reeves’s increase in employer national insurance contributions has played a part in UK unemployment hitting the highest levels since 2021, during the height of the Covid pandemic.

Celebrating a rate cut, in this context, is akin to an arsonist cheering the arrival of the fire brigade.

There are, though, factors beyond Reeves’s control. Not least the dire state Britain’s economy was left in by the Conservative party, and Donald Trump’s damaging tariff war.

The Bank has also played a role. Borrowers have been singed by three years of punitively high interest rates set in deeply restrictive territory. The policy is the central banker’s main tool for combating inflation as it chokes off demand by incentivising saving and discouraging spending.

After the inflation shock triggered by Russia’s invasion of Ukraine, Threadneedle Street argues it had little choice but to act. But the growth trade-off is clear. Even after successive rate cuts, the Bank’s own analysis shows the base rate continues to subtract about 2% from the level of GDP.

Anyone who has remortgaged their home since 2022 knows this first-hand. And despite progress since the Liz Truss debacle, millions of borrowers still face substantially higher loan repayments – and will continue to do so for years to come. That is hardly going to light a match under the UK’s consumption-driven economy.

This week the Bank’s policymakers are expected to be split on the appropriate way forward. Some on the nine-strong monetary policy committee (MPC) recognise the damage rates are doing at a time when inflation is cooling. Others think a tough approach is warranted to snuff out price rises.

Andrew Bailey is expected to hold the casting vote. The Bank’s governor has suggested he thinks inflation is more likely to fall back than stick at stubbornly high levels – paving the way for a quarter-point cut on Thursday.

Next year, however, it is tougher to anticipate how the MPC will respond. Policymakers are likely to remain divided on the inflation outlook and the “neutral” position for rates – the point at which they are neither stoking nor hosing down economic activity.

Reeves’s budget measures – including relief on energy bills, fuel duty, rail fares and prescription charges – could support the case for deeper cuts. The Bank predicts the policies could slash headline inflation by up to 0.5 percentage points by the middle of 2026.

All of this was part of a deliberate strategy inside the Treasury in the hope voters give credit to Labour for lower mortgage costs. Government borrowing costs could also fall back, unpicking some of the factors behind the recent years of fiscal drama in Westminster.

However, many economists warn the reprieve could be temporary.

Much of the disinflationary impulse will be in energy prices, and do little to help Britain’s issues with sticky service sector inflation. Other areas of government policy could also push in the wrong direction.

Business leaders warn a higher minimum wage, business rates, and other tax increases will drive up their costs – resulting in companies putting up prices for their customers, in turn stoking inflation.

That said, some of the factors the hawks are betting on look shaky.

Business costs are rising but hardly at breakneck speed. At 4.1%, the rise in the minimum wage from April is significantly below that in previous years – particularly when set against the context of 2022, when Jeremy Hunt ignored misplaced warnings about a wage-price spiral and increased the legal pay floor by 9.7% from April 2023.

By the time we get to spring, there should be signs that inflation is undershooting, and wage growth is slowing. The economy will probably still be lacking momentum. Household confidence may be picking up, and companies will probably lack the pricing power to push through yet more increases.

All of this means Reeves could see more rate cuts from the Bank.