The Bank of England is set to cut its growth forecasts this week in a fresh blow to Rachel Reeves' hopes of boosting the economy. The Chancellor vowed to make growth her number one mission. She unveiled a controversial plan last week to expand Heathrow airport as part of this. Growth has stalled since the Election with consumer and business confidence nose-diving after her Budget slapped employers with a £25 billion increase in their National Insurance payments.

The tax raid has hit companies hard, with supermarkets Tesco and Sainsbury's among retailers to announce job losses in recent weeks, despite Reeves' belated bid to talk up the economy. Against this gathering gloom, the Bank – led by governor Andrew Bailey – is expected to lower its outlook for growth in gross domestic product (GDP) this year from 1.5 per cent to 1 per cent, after the economy flatlined in the second half of last year.

The move will raise fears that more tax rises and public spending cuts will be needed if Reeves is to meet her fiscal rules and balance the books this Parliament. Pessimistic: The Bank of England headquarters on London's Threadneedle Street. The Office for Budget Responsibility (OBR), the independent watchdog, is due to deliver its latest verdict on the public finances next month. It is expected to hack back its own estimate for growth of 2 per cent this year.

The OBR will give Reeves its first round of forecasts this week. A big downgrade – on top of the recent rise in Government borrowing costs – would wipe out the slim £10 billion a year of headroom Reeves has, experts say. There will be some relief for the Chancellor this week if – as widely expected – the Bank cuts interest rates by a quarter of a percentage point to 4.5 per cent. 'The economic outlook has soured, the growth outlook has deteriorated and the labour market has loosened' since the Bank's last update in November, said Sanjay Raja, senior economist at Deutsche Bank.

The move could be the first in what two big US investment banks see as a series of rate cuts if the economy continues to struggle, forcing the Bank to take even more aggressive action. Analysts at Morgan Stanley reckon that the base rate could fall to 3.5 per cent by the end of this year. Goldman Sachs economists say it could be as low as 3.25 per cent by the middle of next year. Their view is at odds with the consensus among traders, who see no more than three rate cuts this year while inflation remains above the Bank's 2 per cent target rate.

Despite anaemic growth and the poor economic outlook, experts say that the Bank is unlikely to unleash its 'big bazooka' by slashing rates by half a percentage point in one go. Susannah Streeter at investment platform Hargreaves Lansdown said: 'I think it would be unnerving, and a signal that policymakers are pessimistic about the economy.'. Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.