Market Analysis

British average weekly earnings, excluding bonuses, were 5.4% higher in the three months leading up to June, compared to the previous year, according to the Office for National Statistics on Tuesday.

Economists surveyed by Reuters had anticipated regular wage growth of 5.4%.

The Bank of England stated it would continue to closely monitor wage growth after lowering interest rates on August 1, following nearly a year of maintaining them at a 16-year high of 5.25%.

Regular pay has been increasing at about twice the rate the BoE considers consistent with maintaining inflation at its 2% target over the medium term. The central bank expects inflation data on Wednesday to show it back above target.

However, employers foresee lower headline inflation reducing the pressure to raise wages in the coming year. On Monday, the Chartered Institute of Personnel and Development reported that employers expect to increase pay by 3%, the lowest in two years, while a BoE survey indicated anticipated pay rises of 4.1%.

Last month, newly appointed Labour Party finance minister Rachel Reeves approved pay increases of at least 5% for millions of public sector workers, including a 22% rise for junior doctors over two years to settle a long-running industrial dispute.

The BoE is placing greater emphasis on private-sector wage growth, which it says has a more direct influence on inflation. It forecasts that this growth will slow to 5% in the final quarter of this year and further to 3% by late 2025.

Paraphrasing text from "Reuters" all rights reserved by the original author.