UK Wage Growth Eases as Bank of England Contemplates Rate Cuts

British core wage growth decelerated once again, marking its slowest increase since the three months leading up to September 2022, yet it maintained strength relative to historical norms, as per official data likely to receive a cautious nod from the Bank of England.

Official figures from the Office for National Statistics revealed that regular wages excluding bonuses grew by 6.0% in the three months ending in February compared to the same period a year ago, down marginally from the 6.1% rise recorded in the November-to-January timeframe.

A Reuters survey of economists had anticipated a more pronounced slowdown in regular wage growth, forecasting a decrease to 5.8%, a figure within the Bank of England’s purview as it weighs the timing of potential interest rate cuts.

Jack Kennedy, senior economist at job platform Indeed, commented, “The labor market continues its gradual cooling, yet persistent high wage growth underscores concerns regarding inflation persistence. With stubborn US inflation dampening hopes for an imminent Fed rate cut, the prospects for UK rate reductions before autumn appear uncertain.”

Following the data release, the pound edged slightly lower against the US dollar and euro, prompting investors to scale back their expectations for Bank of England rate cuts this year.

Meanwhile, growth in total pay, inclusive of more volatile bonus payments, remained steady at 5.6%. The Reuters poll had indicated a slight slowdown to 5.5%.

The unemployment rate unexpectedly increased to 4.2% from 3.9%, though the ONS noted some volatility in its data as it undergoes revisions to its survey methodology.

Vacancies continued their downward trend for the 21st consecutive quarter in the three months through March, decreasing by 13,000 from the October-to-December period and 204,000 year-on-year to 916,000. However, they remained 120,000 above pre-COVID levels.