In July, businesses in Britain’s expectations for wage growth in the next year eased slightly, according to a survey that may help ease the worries of BoE policymakers who have to keep inflation on track.
In the BoE’s Decision Maker Panel survey, expectations for wage growth over the next year dropped from 4.2% in the 3 months to June to 4.1% in the 3 months to July, while the measure rose slightly from 4.0% to 4.1% on a single-month basis.
Pantheon Macroeconomics’ chief UK economist, Rob Wood, said easing recruitment difficulties and inflation would help slow wages more decisively in H2 of 2024.
Wood said employment growth, wage growth, inflation, recruitment difficulties, and inflation expectations have all dropped since the MPC hiked rates to their peak, indicating tight monetary policy was working.
There were however also enough indications for Wood to expect inflation and wage growth would linger at higher than target consistent rates for longer than the MPC expected.
The BoE reduced interest rates to 5% on Thursday, down from 5.25%, a 16-year high.
Although it was the first time the central bank reduced rates since March 2020, Governor Andrew Bailey said the BoE would not commit to a series of quick cuts in borrowing costs.
