Wage Watch: British Salaries Inch Up as Monetary Easing Looms

Wage growth in the United Kingdom is decelerating amid discussions at the Bank of England regarding potential interest rate reductions.

Per official data, the country's basic wages demonstrated moderate increases once again, marking their lowest point in the three-month period up to September 2022, yet still remaining relatively high in historical comparison.

According to the Office for National Statistics, progressive wage excluding bonuses saw a 6.0% uptick in the three months leading to February compared to the same period the previous year, slightly below the 6.1% increase observed between November and January.

Economists' projections, as disclosed by Reuters, indicate a further slowdown in the growth of regular wages—a metric which the Bank of England pays close attention to in its contemplation of interest rate adjustments—expected to decrease to 5.8%.

Jack Kennedy, a Senior Economist at Indeed Hiring Lab covering UK and Ireland labor markets, highlighted that although the labor market has been gradually slowing down, robust wage growth continues to raise concerns about inflation.

Despite ongoing price pressures in the United States, which are tempering hopes for an imminent rate cut by the Federal Reserve, the likelihood of a rate reduction in the UK before fall remains uncertain.

Following the publication of the data, the pound sterling experienced a slight decline against both the US dollar and the euro, leading investors to lower their expectations for interest rate cuts by the Bank of England this year.

Growth in total pay, inclusive of more variable bonuses, held steady at 5.6%. Additionally, the Reuters poll indicated a marginal deceleration in growth to 5.5%.

The unemployment rate increased to 4.2%, surpassing the anticipated 3.9%, although the ONS noted that the data still carried some volatility as it scrutinized the research underpinning the statistics.

In the three months leading to March, job vacancies continued their 21st consecutive decline, dropping by 13,000 compared to the October-December period and by 204,000 compared to the previous year (916,000), yet remaining 120,000 higher than pre-COVID levels.