Workers walk through the Canary Wharf financial district ahead of the Bank of England’s decision to change interest rates in London, England, on August 3, 2023.Reuters/Toby Melville/File Photo Obtaining license rights
LONDON, Sept 12 (Reuters) – Data on Tuesday also showed a cooling in the labor market as Britain had another record month of wage growth, possibly the last in this cycle, the Bank of England said. We are on track to raise interest rates again.
Average weekly wage growth for the three months to July was an annualized 8.5%, up from 8.4% the previous month and the highest on record in more than 20 years, excluding distortions caused by the COVID-19 pandemic. Recorded. This was revealed by the Office for National Statistics (ONS).
Most investors believe the Bank of England will then raise interest rates again on September 22, from 5.25% to 5.5%, in a bid to rein in inflation, one of the highest in the major developed world.
But other labor market indicators highlighted that many BoE officials were cautious about the economic outlook.
The unemployment rate has risen, the number of employed people has fallen sharply, and the number of job openings has fallen below 1 million for the first time in two years.
“The bigger question is what happens next,” said Hugh Gimbar, global market strategist at JPMorgan Asset Management. “The World Bank would be reluctant to continue tightening if it saw other central banks around the world entering into a pause.
“Still, unless the incoming data turns decisively positive, a further hike to a final rate of 5.75% will absolutely be on the table.”
Last week, BoE Governor Andrew Bailey said the central bank was “very close” to stopping rate hikes, but borrowing costs could still rise due to stubborn inflationary pressures.
The unemployment rate in the three months to July rose to 4.3% from 4.2% the previous month, the ONS said, the highest level since the three months to the end of September 2021.
The unemployment rate is already above the 4.1% the BoE indicated for the third quarter as a whole when it released its last forecast in early August.
Employment fell by a bigger-than-expected 207,000 in the three months to July, including a 182,000 drop in London, the biggest decline since the three months to October 2020. decreased.
Meanwhile, the number of employed people aged 16 to 24 decreased by 176,000 in the three months to July, the second largest decline on record.
“The labor market is showing more signs of cracking than ever before,” Nomura economists say, predicting next week’s BoE monetary policy committee will be more divided over interest rate hikes than they have been in months. he added.
Following the statistics, the pound depreciated slightly against the dollar.
Wages continued to rise rapidly, outpacing the rate of inflation. Total pay, excluding bonuses, rose 7.8% year-on-year, the fastest rise since ONS records began in 2001, and in line with economists’ forecasts polled by Reuters.
Adjusted for consumer price inflation, average weekly gross income increased by 0.6%, the first positive increase since March 2022.
The good news for workers is that real wage levels are not much different than they were more than 15 years ago.
Treasurer Jeremy Hunt said: “Wage growth remains strong, due in part to the impact of lump sum payments to public sector workers, but we need to stick to our plan to halve inflation if real wages are to rise sustainably.” Ta.
Reporting by Andy Bruce and David Milliken.Editing: Sachin Ravikumar, David Holmes, Katherine Evans
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