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Economists say the Bank of England will step up its lawsuit to hold interest rates today, and UK wage growth remained strong in the three months leading up to January against a slow employment background.
The National Bureau of Statistics said Thursday that annual growth in revenues for the average week, excluding bonuses, held at 5.9% in the three months leading up to January, was in line with economists’ expectations.
Including bonuses, wage growth over the period fell slightly to 5.8%, down from 6.1% in the three months ended December to 6.1%.
Individual figures based on tax records showed payroll employment remained flat, with a slight increase of 9,000 employees between December and January.
Employment rose just 0.1% per year until January. However, the preliminary figures for February showed signs of confidence creeping up, with an increase of 21,000, or 0.1% a month. The first estimates for the most recent month have often been revised in the past.
For the BOE’s Monetary Policy Committee, the combination of strong wage growth and weak employment is difficult.
“I don’t think that, rather than collapse and wage growth remain in the 5.5-6.0% range, with labour market cooling, the Bank of England will cut interest rates from 4.50% today,” she added, “but not as it is in the 5.5-6.0% range.” “All of this puts the bank in a tricky position.”
The MPC is worried that the job market could get worse, but it is also pessimistic about the proportion of the UK economy able to grow without price pressure. Inflation was 3% in January and is set to rise by mid-year.
BOE Governor Andrew Bailey said last month there was a risk that the budget tax hike could raise more prices than BOE originally anticipated and could hit jobs.
