Surge in wages and what it means for borrowers waiting for interest rates cut
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Wage growth in the UK has jumped higher for the first time in over a year, leading to predictions that the Bank of England will hold interest rates last this week. Offical figures reveal that regular earnings shot up 5.2% during the three-month period to October, climbing from 4.9% in the preceding quarter and marking the first uplift since August of the previous year. This surge in earnings growth also surpassed inflation by 3% for the same timeframe when considering the Consumer Prices Index (CPI), as per figures from the Office for National Statistics (ONS).
ONS director of economic statistics Liz McKeown said the rise in wage growth was driven by the private sector, where regular earnings lifted by 5.4% in the three months to October, which is the highest since May. In contrast, public sector wage rises were pegged at 4.3%. The Bank of England keeps a keen eye on pay trends as an indicator of looming inflationary forces within the economy.
Industry commentators now firmly believe that the uptick in wages is set to anchor the base rate at 4.75%, in line with anticipations that policymakers will opt for a steady hold come their decision-making meeting on Thursday—having already cut rates twice this past year amid receding inflation strains.
Economist Gora Suri of PwC UK, said: "Despite the considerable disinflation we have seen in the UK economy over the last two years, these underlying inflationary pressures remain.". "This means that the Bank of England is highly likely to keep interest rates on hold at its next meeting on Thursday, before resuming rate cuts in the new year.".
