LONDON, Nov 12 – British wage growth has slowed to its lowest pace in more than two years, providing the Bank of England with reassurance that inflationary pressures may continue to ease. Data released by the Office for National Statistics (ONS) showed that average weekly earnings, excluding bonuses, rose by 4.8% in the third quarter compared to the previous year.
Wage Growth Decline Matches Bank of England Expectations
The latest figures indicate that wage growth, excluding bonuses, is at its weakest level since June 2022. This development aligns with the Bank of England’s (BoE) forecast for the third quarter and is slightly above economists’ predictions of 4.7%. While wage growth remains positive, the slower pace may reduce the pressure on consumer prices, aligning with the BoE’s goal of gradually reducing inflation.
Impact on Bank of England’s Monetary Policy
The BoE, which recently cut interest rates for only the second time since 2020, sees the slowdown in wage growth as an encouraging sign. Last Thursday’s rate reduction was accompanied by a message of cautious optimism, with officials suggesting that future cuts would likely be gradual. The BoE noted that the upcoming UK government budget could stimulate economic growth and potentially drive up inflation. With wage growth slowing, the bank may feel less urgency to tighten monetary policy aggressively.
Private Sector Wage Growth Also Slows
Private sector pay, a key indicator of inflation pressures, also grew at an annual rate of 4.8% in the three months leading up to September. The BoE closely monitors private sector pay growth as it reflects labor demand and cost pressures. The recent slowdown aligns with the central bank’s outlook, further supporting the possibility of gradual interest rate adjustments in the future.
Outlook for the UK Economy
The combination of slowing wage growth and recent interest rate cuts points to a more controlled approach to managing inflation in the UK economy. The BoE is hopeful that these developments will lead to a sustainable reduction in inflationary pressures, supporting stable economic growth in the months ahead.