UK wage growth continues to slow, easing pressure on BoE

British wages experienced the slowest pace of growth in almost a year, according to data released on a Tuesday.

The growth in wages, excluding bonuses, slowed for the third consecutive release, reaching an annual rate of 6.6% in the September-to-November period, compared to 7.2% in the three months to October.

When bonuses are included, pay growth also decelerated, dropping to 6.5% from 7.2% in the three months to October.

The report mentions that this is the weakest increase in regular earnings since the three months to January 2023.

Economists interpret the deceleration in pay growth as a signal of potential weakness in the labor market. This could contribute to the Bank of England’s reassurance regarding concerns about a wage-price spiral and may lead to faster declines in inflation.

The BoE has been worried that rapid wage growth could hinder the achievement of its 2% inflation target, despite a recent slowdown in the headline rate of price growth.

While the data suggests a slowdown in wage growth, inflation pressures are still evident in the labor market, with many employers reportedly increasing pay significantly to attract and retain staff.

The Bank of England responded to concerns about inflation by raising borrowing costs 14 times between December 2021 and August 2023. The benchmark interest rate has remained at a 15-year high since then.

The information suggests a complex economic scenario in the UK, with a potential easing of inflationary pressures in the labor market due to slowing wage growth. However, inflation pressures persist, and the BoE’s response has included multiple interest rate hikes to address these concerns.