Wages surge reduces chances of an interest rate cut this week
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The already remote chance of an interest rate cut this week receded further today when latest earnings figures showed “red hot” pay growth accelerating. Data from the Office for National Statistics (ONS) show that average earnings rose 5.2% in the August to October quarter, up from 4.9% in the previous three month period.
The ONS said that in real terms, after inflation is taken into account, workers were 2.2% better off. The manufacturing sector saw the largest annual regular growth rate at 6%. The construction sector saw the largest annual growth rate for total pay, including bonuses at 6.6%,.
The Bank of England is likely to want to see sustained falls in pay growth before agreeing to another cut in the cost of borrowing. Its rate setting Monetary Policy Committee meets on Thursday to decide on the level of interest rates. It is thought highly likely rates will be left at the current level of 4.75%.
Matthew Ryan, head of market strategy at global financial technology firm Ebury, said: “Today’s red hot private sector wage figures almost guarantee that the Bank of England will stress a slow and steady approach to rate cuts during their upcoming meeting on Thursday.
“While UK inflation now appears largely under control, still sky-high earnings growth, combined with the pro-inflationary impact of the Autumn Budget and Trump’s trade policies, risks keeping consumer prices higher for longer. “. Yael Selfin, chief economist at KPMG UK, said: “Today’s data are unlikely to unlock an interest rate cut by the Bank of England on Thursday, with wage growth increasing to 5.2%.
