By Chris Dorrell
Wage growth did not budge in the first quarter of the year as the Bank of England deliberates on whether to cut interest rates at its next meeting in June.
Annual pay growth excluding bonuses averaged 6.0 per cent between January and March, according to figures from the Office for National Statistics (ONS), unchanged from 6.0 per cent last month and slightly ahead of expectations.
Including bonuses, pay growth came in at 5.7 per cent, unchanged from last month’s upwardly revised figure of 5.7 per cent. Economists had expected it to fall to 5.5 per cent.
Unemployment meanwhile rose to 4.3 per cent, compared to the previous estimate of 4.2 per cent, suggesting slack is building in the labour market.
The Bank of England voted to leave interest rates on hold last week but suggested that progress on key pieces of data, including wage growth, could pave the way for cuts to begin in June.
“A change in Bank Rate in June is neither ruled out nor a fait accompli,” Andrew Bailey, governor of the Bank said after last week’s decision.
Although pay growth has eased from peaks over over eight per cent seen last summer,the MPC noted that wage data “still indicated elevated domestic inflationary pressures”.
Without improvements in productivity, wage growth needs to fall to around three per cent to avoid being inflationary, economists think.
April’s inflation figures are due out next week and will likely show inflation fall close to two per cent. Rate-setters will receive another round of labour market and inflation data before June’s meeting, which could either tilt the scales in favour of a June cut or force the Bank to wait until August.
More to follow
