The Bank warned that public sector pay deals were pushing up wages across the economy, which could potentially fuel further inflation.

“The public sector accounts for around a fifth of total employment in the UK and the announced increases are expected to increase average weekly wages across the economy by around 0.5 percentage points once these pay deals will be fully implemented.

On the other hand, Mr. Trump has pledged to slash the civil service by stripping it of the career protections it currently enjoys.

Inspired by Joe Biden, Ms Reeves has long embraced a more active state and a “modern industrial strategy” which she said was essential to “creating” and “shaping markets”.

“The Biden administration is rebuilding America’s economic security, strength and resilience,” she said last year.

“We’re trying to reduce people’s energy bills. We are trying to create more good jobs because this is obviously a massive growth sector,” she told MPs this week.

She also welcomed Thursday’s rate cut, calling it “good news for millions of homeowners and businesses,” remaining unrepentant about her decision to borrow more to finance public spending.

The budget decisions would put public finances “on solid footing and reset public spending so that our schools and hospitals are properly funded,” she said, while pledging not to “come back with a new charge for tax increases in the same way that the Conservatives did.”

However, the Bank warned in its latest economic outlook that Ms Reeves’ borrowing plans represented a “substantial short-term easing of fiscal policy compared to plans presented by the previous government in March”.

Claire Lombardelli, the Bank’s deputy governor, added: “Clearly the early fiscal easing that the budget represents means we have higher inflation (over the next three years).”

Mr Bailey stressed that the extent to which the Bank will have to maintain higher interest rates for longer will depend on how businesses respond to the tax raid.

He said: “Generally speaking, the channels go through prices, they go through wages, they go through employment and they could also go through productivity. »

While the Office for Budget Responsibility (OBR), the government’s tax and spending watchdog, said the biggest impact of the measure would be in lower wages, the Bank warned that Companies could also choose to pass on higher costs to consumers, which would maintain interest. interest rates rise for longer as wages continue to rise.

Companies including Wetherspoons and BT have warned they will be forced to raise prices in response to the Chancellor’s decision to increase employers’ national insurance contributions.