Adhering to the spending review for 2021, the Ministry of Defence budget will increase in cash terms from £47.9bn this year to £48bn in 2023 and then to £48.6bn in 2024.
Meanwhile, CPI inflation is expected to rise further last month after hitting a 40-year high of 10.1% in September.
The Conservative manifesto pledged in 2019 to "increase the budget by at least 0.5% above inflation each year of the new parliament", suggesting that failure to add to planned growth could constitute a breach.
According to the Telegraph, ministers will argue that the promise can be fulfilled by adopting an average annual increase over the five-year period as a whole.
A Treasury source said they would not comment on the speculation.
Richard Dannatt, the former army chief, told the paper that cutting real terms would seem "unbelievable" given the situation in Ukraine.
He believes the government must cut public spending to balance the books as it is reluctant to raise tax.
"Given that we had 2.5% and 3% under the nose of defence planners, now to reduce it to 2% or lower, it makes you wonder how on earth you can plan anything sensible for the future," he added.
The chancellor suggested next week's Autumn Statement would show the UK could "pay our way" as the country learns the lesson of a disastrous mini-budget.
He made the comments on Friday after his predecessor Kwasi Kwarteng used his first interview since his dramatic departure from government to argue that the prime minister and chancellor could not blame Liz Truss for the massive black hole in the country's finances.
On 23 September Mr Kwarteng announced the biggest tax cut in half a century.
Using more than £70 billion of increased borrowing, he outlined a package that included abolishing the top rate of income tax for the highest earners and cutting the cap on bankers' bonuses, in addition to an extremely expensive energy package.
This caused turbulence in the financial markets, triggering an economic and political crisis that eventually led to Ms Truss's resignation as prime minister.