UK wages expected to feed pressure for BoE rate hikes

The Bank of England in London
The Bank of England in London
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Although the British inflation fever may be beginning to subside, data to out this week are expected to demonstrate that the economy still has to cool down before the Bank of England can modify its stance on interest rates.

Official statistics are slated to show Tuesday that wages accelerated to the fastest pace on record in July, pushing up inflation in the services sector, according to a Bloomberg survey of economists. That will likely temper optimism about a subsequent report Wednesday that is forecast to show consumer price pressures eased to the lowest level in almost 1 1/2 years.

Such figures leave little reason yet for the Bank of England to end its longest cycle of interest rate hikes in three decades. Investors are betting that policymakers led by Governor Andrew Bailey will raise the key lending rate again in September and November, while the European Central Bank and US Federal Reserve have left the door open to a pause in their tightening.

“Taken together, the latest data suggest that strong wage growth will likely contribute to keeping inflation elevated in the coming months,” said Paula Bejarano Carbo, an economist at the National Institute of Economic & Social Research.

UK inflation probably slid to 6.7% in July from 7.9% the month before, according to the median forecast collected by Bloomberg. That compares with the latest reading of 3.2% in the US and 5.3% in the euro area.

Any decline in the headline number would be a relief to PM Rishi Sunak’s government, whose budget deficit is under growing strain from higher debt-service costs and demand from workers for more pay. While the UK figure would be the lowest since early 2022, underlying pressures that exclude food and energy prices are likely to remain near their strongest level in three decades. The core measure of the CPI is expected to ease to 6.8% from the peak of 7.1% reached in May.


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Dulal Ahmed Chowdhury

Dulal Ahmed Chowdhury is the Editor of The Daily Dazzling Dawn. Previously, he has been serving in important positions in all the famous national dailies of the Bangladesh since the nineties. He has played a commendable role in journalism by participating in various events at the national and international levels. United Nations Conference, World Climate Conference, SAARC Summit are notable among them.

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