British Wage Growth Slows, But Bank of England Unlikely to Cut Interest Rates
UK wage growth has slowed more than expected in the three months leading up to October, according to official data released by the Office for National Statistics (ONS). However, pay still continues to increase at a substantial rate, making it unlikely that the Bank of England (BoE) will cut interest rates in the near future.
The figures from the ONS reveal that earnings, excluding bonuses, were 7.3% higher than the previous year. Economists who were polled by Reuters had predicted a slightly higher rise of 7.4%. While this data does indicate a slowdown in regular pay growth, it should be noted that pay growth in the previous quarter was revised upwards to 7.8%, with the quarter before that reaching a peak of 7.9%, the highest since the ONS began collecting data in 2001.
When bonuses are taken into account, which tend to be volatile, pay growth decelerated to 7.2% from 8.0% in the three months to September.
The BoE has expressed concerns that the strong pay growth, particularly in the private sector, may hinder efforts to bring inflation down to the target rate of 2%, even as the broader economy experiences stagnation.
In the private sector, earnings excluding bonuses dropped to 7.3% in the three months leading up to October, compared to 7.9% in the July-September period.
The BoE has raised interest rates 14 times consecutively between December 2021 and August this year, but has since maintained the rates. It is widely anticipated that borrowing costs will remain unchanged in Thursday’s announcement.
Officials from the bank have emphasized that they are not currently considering a reduction in borrowing costs.
Following the release of the ONS figures, the British pound briefly weakened against the US dollar.
In addition to wage growth, the data also disclosed that the UK’s unemployment rate held steady at 4.2% in the three months leading up to September, with employment rising by 50,000 individuals.
However, the ONS has cautioned that these figures may not be entirely reliable due to changes in the methodology used to measure the job market through its monthly Labour Force Survey. These changes were implemented as a result of a decrease in the number of responses received.
This article was reported by William Schomberg, and edited by Kate Holton and David Milliken.
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