Workers walk through the Canary Wharf financial district, ahead of a Bank of England decision on interest rate changes, in London, Britain August 3, 2023. REUTERS/Toby Melville/File Photo license fees
LONDON, Sept 12 (Reuters) – Another record month for wage growth in Britain has seen the Bank of England raise interest rates again, perhaps for the last time in the current cycle , with data released Tuesday also showing a slowdown in the labor market. .
Average weekly wage growth in the three months to July reached 8.5% in annual terms, up from 8.4% a month earlier and marking a new high, excluding distortions linked to the COVID-19 pandemic, in records dating back more than 20 years, according to the report. » said the Office for National Statistics (ONS).
Most investors believe this will prompt the BoE to raise interest rates again on September 22, from 5.25% to 5.5%, as it tries to tame the highest inflation rate among the major advanced economies.
But other labor market indicators underscored the caution among many senior BoE officials about the economic outlook.
The unemployment rate has increased, the number of employed people has fallen sharply and job vacancies have fallen below the million mark for the first time in two years.
“The biggest question is what path to take next,” said Hugh Gimber, global markets strategist at JP Morgan Asset Management. “The Bank will be reluctant to continue its tightening if it has seen other central banks around the world taking a pause.
“But if the available data does not prove definitive, a further increase in the final rate to 5.75% is absolutely possible.”
Last week, BoE Governor Andrew Bailey said the central bank was “much closer” to ending its streak of rate hikes, but borrowing costs could rise further due to pressure stubborn inflationists.
The unemployment rate rose to 4.3% in the three months to July, from 4.2% a month earlier, its highest level in the three months to the end of September 2021, the unemployment rate said. ONS.
The unemployment rate is already higher than the 4.1% that the BoE had forecast for the entire third quarter, when publishing its latest forecasts in early August.
Employment fell by a more-than-expected 207,000 in the three months to July, including a fall of 182,000 in London – the biggest such fall in the three months to October 2020.
The number of employed people aged 16 to 24 fell by 176,000 in the three months to July, the second largest decline on record.
“The labor market is showing more signs of cracks than ever before,” Nomura economists said, adding that they expected the BoE’s monetary policy committee to be more divided next week on the hike rates than it had been in previous months.
The British pound fell slightly against the dollar after the data was released.
Wages continued to rise rapidly and above the rate of inflation. Wages excluding bonuses rose 7.8% from the previous year – the highest rate since ONS records began in 2001 and in line with economists’ predictions in a Reuters poll.
Accounting for consumer price inflation, total average weekly earnings increased by 0.6% – the first positive figure since March 2022.
While this is good news for workers, wage levels in real terms remain no better than they were more than 15 years ago.
“Wage growth remains high, partly reflecting one-off payments to public sector workers, but for real wages to rise sustainably we must stick to our plan to halve inflation,” he said. said Finance Minister Jeremy Hunt.
Reporting by Andy Bruce and David Milliken; Editing by Sachin Ravikumar, David Holmes and Catherine Evans
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