Wage growth slows in boost to hope for interest rate cut – ONS

The pace of wage rises has slowed and came in lower than expected, official figures show.

Both average weekly earnings and wages excluding bonuses came in lower than expected, a boost to interest rate setters at the Bank of England, potentially opening the door for steeper borrowing cost deductions.

There was no change at all in the growth of average weekly earnings, which continued to rise 5.6%, according to data from the Office for National Statistics (ONS) for the three months to February.

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Wages excluding bonuses continued to grow far above the rate of inflation at 5.9%, the ONS said, but below City forecasts.

Economists polled by the Reuters news agency had expected average weekly earnings to rise 5.7% and for wages excluding bonuses to top 6%.

The wage data does not capture the national minimum wage rise, which came into effect on 1 April.

Nevertheless, wage growth was described as “strong” by the ONS. While private sector pay was “little changed”, public sector growth accelerated as pay rises fed through to headline figures. Public sector pay rose by 5.7%, up from 5.2% a month earlier.

What does it mean for interest rates?

The figures are likely to be a boost to the Bank of England, which had been concerned about the inflationary impact of speedily rising wages.

A cut is widely expected when members of the Monetary Policy Committee meet next month. They’re anticipated to reduce the rate to 4.25%.

The Bank of England, as the UK’s central bank, is mandated to bring inflation down to 2% by increasing or decreasing interest rates, which can stimulate or suppress growth by controlling how cheap or expensive it is to borrow money.

How’s the jobs market faring?

The unemployment rate remained unchanged at 4.4%.

The ONS, however, has advised caution in interpreting changes in the monthly unemployment rate due to concerns over the figures’ reliability.

The exact number of unemployed people is unknown, partly because people don’t answer the phone when the ONS calls.

There are signs, however, of cautious hiring as job vacancies fell to pre-pandemic levels for the first time since 2021.

As well as rising minimum wages, there are increased costs for employers in the form of higher national insurance contributions.