UK wage growth slows ahead of Bank of England meeting

The growth in UK wages has slowed in October but continues to outpace inflation, which currently stands at 4.6%.

The October decline in wages was the most significant since the period up to November 2021, according to the Office for National Statistics (ONS).

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Average weekly earnings slowed from 7.8% in September to 7.3%, slightly exceeding predictions.

The pound also experienced a slight decline in response to these figures. The GBP now trades at 1.26 USD.

“While annual growth in earnings remains high in cash terms, there are some signs that wage pressure might be easing overall,” said Darren Morgan, director of economic statistics at the ONS.

Wage growth will likely play a part in the Bank of England’s decision on interest rates in its upcoming Monetary Policy Committee meeting later this week.

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Inflation has decreased after a series of interest rate hikes by the Bank of England, leading some financial markets and economists to speculate that the Bank might reduce interest rates from the current 5.25%.

However, despite inflation easing to 4.6%, it still exceeds the bank’s 2% target. Moreover, regular pay outpaced inflation in the three months leading up to October.

However, “the numbers are still very high historically and still well north of the 2% inflation target. We should also remember that at the last meeting, three members voted for a 25-bps rate hike due to concerns over high wage and service inflation,” stated Michael Hewson, Chief Market Analyst at CMC Markets UK.

“These three are unlikely to have shifted materially on that position because of today’s numbers, given that we are still well above 7%, and Bank of England Chief Economist Huw Pill said that inflation was starting to become ‘challenging to squeeze out of the system,'” further commented Michael Hewson.

Unemployment rates are steady at 4.2%.

On Thursday, the bank is expected to announce its decision to hold interest rates further.

However, “the reality is that while the Bank of England was the first central bank to start raising rates, it doesn’t necessarily follow that they will be the first to start cutting,” said Michael Hewson.

In November, Governor Andrew Bailey of the Bank of England stated that it was “much too early to be thinking about rate cuts”.

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