The governor of the Bank of England has told MPs that interest rates may not rise much further amid expectations that inflation is set to fall “markedly” by the end of the year.

Andrew Bailey said rates were “much nearer now to the top of the cycle” following a 14th consecutive hike – to 5.25% – last month.

His comments will give some hope to homeowners and the wider housing market, which has experienced a slump in recent months amid high mortgage rates.

Speaking to the Commons Treasury Committee on Wednesday, the governor also reiterated his prediction that inflation is likely to be down significantly this winter.

But he also cautioned that it may temporarily “tick up” following the increase in petrol prices in August and amid concerns over the rising cost of oil.

Mr Bailey told MPs that while there had previously been a period when “it was clear that rates needed to rise”, the Bank was “not in that place anymore”.

He added: “judgements now are much finer… I think we are much nearer now to the top of the cycle.

“And I’m not therefore saying we’re at the top of the cycle, because we’ve got a meeting to come, but I think we are much nearer to it, on interest rates, on the basis of current evidence.”

Most economists expect the Bank to raise interest rates for a 15th time in a row to 5.5% later this month, and predict rates to peak at 5.75%, according to a poll.

Read more from business:
City grandee lined up as new NatWest chairman
Full list of Wilko stores to close next week
Energy boss defends profits amid predictions of tough winter

While inflation has gradually been coming down from its peak of 11.1% last October, the rate of price rises – which was 6.8% in the year to July – remains high.

When asked about inflation, the governor told MPs: “Many of the indicators are now moving as we would expect them to move, and are signalling that the fall in inflation will continue and, as I’ve said a number of times, I think [it] will be quite marked by the end of this year.

“I should say possibly that we will get a tick up in the next release because fuel prices went down in August last year
and went up a bit in August this year… but I don’t [see] that as a central change in the path.”

The pound slumped to near a three-month low against the US dollar – to around $1.24 – following his comments about inflation falling, which echoed similar remarks by Chancellor Jeremy Hunt at the weekend.

Mr Hunt warned inflation may soon hit a “blip” – but also added he was still confident it would be halved as promised by the end of 2023.

Mr Bailey was also quizzed about a Sky News interview with the Bank’s former chief economist Andy Haldane, in which he accused the institution of helping to fuel inflation.

Mr Haldane said the Bank had printed money via quantitative easing to help the economy after COVID for “longer than it needed to” and also suggested it had acted too slowly to increase interest rates.

The governor stressed that his former colleague had made his comments “with hindsight” and said: “I don’t enter into those judgements because I think it is very difficult to separate out the hindsight judgement from the decision at the time”.

But, commenting on the “last phase” of quantitative easing to support the economy following COVID, he said: “I think most of the people who give evidence on this say they don’t think actually it made a major contribution to inflation”.