While UK unemployment rate unexpectedly rose to 4.4% in April, from 4.3% the fact that people continue to see unacceptably high wage increases will be of concern to the Bank of England (BoE). Average earnings remain high – excluding bonus payments wage increases remain at 6%, way above the recent 2.3% rise in consumer prices. Including bonuses pay remained at 5.9%, it had been expected to drop to 5.7% year-on-year. The figures are likely to reinforce the majority view on the BoE’s monetary policy committee that more evidence of inflationary pressures easing is needed before cutting interest rates. One positive for rates is that there were signs of the labour market cooling, with a slight decline in the number of vacancies and in the number of payrolled employees and an uptick in claims for jobless benefits.
The Bank of England faces a dilemma on interest rate cuts scheduled for their August meeting, influenced by stronger-than-expected wage growth and a slight increase in the UK unemployment rate to 4.4%. Wage statistics, reflecting a minimum wage hike amidst a cooling labor market, present persistent inflationary pressures. The recent financial news has led to a significant drop in sterling against the US dollar. These factors suggest a cautious approach towards rate cuts pending further inflation data, affecting strategy in upcoming Monetary Policy Committee meetings.
