Strong UK Pay Growth Boosts Chance Of Bank Of England Rate Rise

• British wages rose faster than anticipated last month, in a move that economists judge may tip the Bank of England towards a further rise in interest rates next month, despite an unexpected increase in joblessness too.
• The Office for National Statistics (ONS) said the unemployment rate edged up to 3.8% - its highest since the second quarter of 2022 - rather than holding at 3.7%, as forecasted by economists in a Reuters poll.
• Annual pay growth for the three months to January was revised up to 5.9% and held at that level for the three months to February - above all forecasts in the Reuters poll, which had pointed to a drop to 5.1%. Excluding bonuses, wage growth held at 6.6%.
• Sterling strengthened and government bond yields rose to a one-month high after the data release, as financial markets saw a more than 80% chance of the Bank of England (BoE) raising interest rates to 4.5% in May to help bring down inflation, which was above 10% in February.
• High inflation meant that in real terms, average earnings in the three months to February were 4.1% lower than a year earlier, one of the biggest annual drops since ONS records started in 2001. Discontent about pay has been especially high in the public sector, leading to widespread industrial action since late last year. Junior doctors are the latest group to strike, seeking a 35% pay rise to compensate for below-inflation pay rises over more than a decade.
• "Progress in the labour market is painfully slow," said Tony Wilson, director of the Institute for Employment Studies. "Three years on from the start of the pandemic, it's clearer than ever that we are being left behind by other major economies."

(Source: Reuters)