Surge in wages means beleaguered borrowers must wait for a rate cut
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Pay packets are now growing at 5.2 per cent, up from 4.9 per cent three months ago. The Bank of England is expected to keep interest rates unchanged this week after a surge in wage growth that will have officials at the central bank worried about long-lasting inflation.
Pay packets are now growing at 5.2 per cent, up from 4.9 per cent three months ago, according to data from the Office for National Statistics. Rising wages can feed into inflation as people spend more, and the Bank uses higher borrowing costs to keep prices from rising. There had been speculation that rates would be cut this week, which would assist borrowers and those with mortgages. Public sector wage growth fell to 4.3 per cent from 4.7 per cent. The gain was fuelled by the private sector.
Gora Suri, economist at 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.”.
The Bank of England’s Monetary Policy Committee will announce its next decision on interest rates on Thursday 19 December. Money market traders have pushed back their expectation of a rate cut to May. Previous market activity suggested that a cut could have come in March.
Instead, it is likely to stay at 4.75 per cent after it was cut from 5 per cent in November. The strong gains in wages came as new data showed that the number of vacancies fell by 31,000 to 818,000 in the three months to November and the number of people on payrolls in the UK fell by 35,000 to 30.4m between October and November.
