Long-awaited signs of pay growth have been detected by the Bank of England amid evidence that a steady fall in unemployment is making it harder to find staff.

With the jobless rate at its lowest level since the mid-1970s, the regular report compiled by Threadneedle Street’s regional agents found a slight edging up of pay awards.

The agents – who visit businesses regularly and act as the eyes and ears of the Bank across the UK – said settlements were modest and tended to be in the region of 2-3%. After their last check, conducted in June, the agents said settlements were 2-2.5%.

The latest data from the Office for National Statistics indicated annual average earnings growth running at just over 2%, below inflation of 2.6%.

The Bank believes that record levels of employment and the decline in unemployment to 4.5% will give workers the bargaining power to push up pay at a time when their living standards are being eroded and has been surprised by the lack of wage inflation recently.

In their report the agents said jobs were being created but not at a rapid rate. “Overall employment intentions remained modest,” the report said. “Service sector employment intentions reflected the slight pick-up in activity earlier in the year within professional business services. Growth in manufacturing intentions was stable and was dampened by a stronger focus on productivity improvements and automation over job creation. Recruitment difficulties had edged higher, and were gradually broadening across sectors and skill areas.

“Despite this, labour cost growth had been modest, with pay awards clustered around 2–3%.”

The outlook for wages has become central to the Bank’s decision about whether official borrowing costs should be raised from their current record-low level of 0.25%.

The August meeting of the Bank’s monetary policy committee (MPC) left interest rates unchanged but with two dissenting voices – Ian McCafferty and Michael Saunders. One of the reasons the pair gave justifying a tightening of policy was the expectation that continued jobs growth would put upward pressure on wage inflation.

The seven MPC members who supported no change said that, despite positive signs on wage growth, there was not yet enough evidence of a more sustained pick up than that contained in the Bank’s central forecast, which is for average weekly earnings to grow by 2% in 2017, 3% in 2018 and 3.25% in 2019.

The agents reported said that while the cost of retail goods rose further over the summer as increases in import costs caused by the pound’s weakness fed through, feedback from some businesses suggested that inflation was reaching its peak.

Consumer spending growth had slowed slightly further, the agents said. “Some contacts ascribed this to increased caution among consumers and to consumers trading down to cheaper products or brands. Growth in value terms was supported by price inflation with growth weaker in volume terms.”

