Employers’ expectations for UK wage growth have fallen to the lowest level in more than two years, according to a survey that will reinforce the Bank of England’s arguments for holding interest rates at record lows.

The median expectation in the CIPD’s quarterly labour market outlook was for a basic pay increase of 1.2 per cent in the 12 months to December 2016, compared with 2 per cent in the previous report by the association for human resources professionals. More than a fifth of employers planned to freeze pay and a falling number expected to give pay awards of 3 per cent or more.

The fundings add to evidence that a robust recovery in Britain’s labour market – bringing the jobless rate to its lowest in almost a decade – has not been matched by pay growth.

This presents policy makers with a conundrum, since a rapid rise in employment would usually lead workers to demand better pay settlements, driving up inflation. Sluggish wage growth has been a big factor in the BoE monetary policy committee’s decision to keep interest rates on hold, but several MPC members had argued that the effect should be temporary.

A particular worry for the MPC is that low inflation can become entrenched, if workers stop expecting prices to rise and therefore accept static wages. Mark Carney, BoE governor, said last month that policy makers must remain “vigilant” for signs of this taking place.

The CIPD said a growing share of employers – 17 per cent, compared with 13 per cent in the previous quarterly survey – had cited low inflation as a factor keeping wages in check. The proportion that expected inflation to remain at its current low rate had more than doubled to 13 per cent.

Another big factor, however, was the rising cost of employment. More than a fifth of private sector employers cited last autumn’s rise in the national minimum wage and 7 per cent said the government’s auto-enrolment pension scheme had led them to limit basic pay awards.

This is important because one of the big uncertainties for the economy this year is how the labour market will respond to a further sharp increase in the minimum wage, which will affect about a quarter of private sector employers, from April.

Research published on Monday by the Social Market Foundation underlines the pressure this will place on many businesses’ wage bills, and argues they will have to either cut costs or boost productivity through training and higher investment.

However, the CIPD argues that employers will respond by reducing basic pay awards where they are able to rather than by cutting jobs. “The feedback we’re seeing from employers suggests that official forecasts for wage inflation for 2016 are too optimistic,” said Gerwyn Davies, the CIPD’s labour market analyst.