UK firms scale back expected wage growth, BoE survey shows
2024.08.01 13:09
LONDON (Reuters) – British businesses’ expectations for wage growth in the next 12 months cooled slightly in July, according to a survey that could help ease the concerns of Bank of England policymakers who are tasked with keeping inflation on target.
Expectations for wage growth over the coming year in the BoE’s Decision Maker Panel survey fell to 4.1% in the three months to July from 4.2% in the three months June, while on a single-month basis, the measure ticked up slightly to 4.1% from 4.0%.
Rob Wood, chief UK economist at Pantheon Macroeconomics, said easing inflation and recruitment difficulties will help slow wages more decisively in the second half of the year.
“Inflation, wage growth, inflation expectations, recruitment difficulties and employment growth have all eased since the MPC raised rates to their peak, suggesting tight monetary policy is working,” Wood said.
“But there are also enough signals for us to expect wage growth and inflation to linger above target consistent rates for longer than the MPC expects.”
On Thursday, the BoE cut interest rates to 5%, down from a 16-year high of 5.25%.
It was the first time the central bank cut rates since March 2020, the start of the COVID-19 pandemic, but Governor Andrew Bailey said the BoE was not committing to a series of quick reductions in borrowing costs.
Firms surveyed by the BoE expected to raise their own selling prices in the year ahead by less than in the previous survey.
