HOUSEHOLDS will finally see a real terms boost to their pay packets next year as wages growth accelerates and inflation dips below one per cent for the first time in more than a decade, Bank of England forecasts have suggested.

The Bank's quarterly inflation report also appeared to cement the likelihood families will benefit from continued low borrowing costs as interest rates are held at 0.5 per cent until well into 2015 - though savers will continue to suffer.

Growth projections have been edged back slightly as the UK feels the effect of a slowdown in world markets and the spectre of stagnation in the eurozone.

But the continued rock-bottom cost of borrowing will still see gross domestic product expand strongly by 2.9 per cent in 2015, only slightly down from the previous expectation of three per cent, according to the Bank.

It also expects the prolonged squeeze on pay, which has lagged behind inflation since 2008, to come to an end next year.

Governor Mark Carney said it was "more likely than not" that over the next six months he would have to write an open letter to the Chancellor to explain why the rate had fallen below one per cent.

It would be the first time inflation has fallen below one per cent since June 2002.