UK wage growth remains elevated, BoE targets inflation

Wage growth for workers in Britain moderated in the three months leading up to the end of May, inflation remained elevated, posing challenges for the Bank of England (BoE) in its efforts to curb inflation to the targeted 2 per cent level.

Average weekly earnings excluding bonuses, a crucial indicator for inflation pressures, rose by 5.7 per cent compared to the same period a year earlier, according to official data released today by the Office for National Statistics (ONS).

Similarly, total earnings also increased by 5.7 per cent over the same timeframe.

This slight deceleration follows a period where, in the three months to April, regular pay had grown by a more pronounced 6.0 per cent, with total earnings up by 5.9 per cent.

The BoE, set to announce its next interest rate decision in two weeks, faces mounting pressure after Wednesday’s release of higher-than-anticipated inflation data. Investors are now assessing a roughly one-in-three probability of the first rate cut since 2020, scheduled for August 1.

Additionally, the ONS announced today a delay in transitioning to a new version of its Labour Force Survey, previously slated for implementation in September.

The combination of robust wage growth and persistent inflationary pressures sets the stage for a crucial BoE decision as policymakers navigate economic signals amidst global uncertainties.

Attribution: Reuters.