British wages slowed less than expected, reinforcing the central bank’s cautious stance on interest rate cuts_Rolling News_Finance_Securities Star

(Original title: British wages slowed less than expected, strengthening the central bank’s cautious stance on interest rate cuts)

Zhitong Finance APP has learned that UK wage growth has cooled less than expected, reinforcing the Bank of England’s reason to remain cautious in cutting interest rates faster.

The Office for National Statistics said on Tuesday that average earnings excluding bonuses rose 4.8% year-on-year in the three months to September, just down from 4.9% previously. While this figure is the lowest since mid-2022, economists had expected a larger drop of 4.7%.

The data supports the Bank of England’s cautious approach after last week cutting interest rates for the second time this year. With underlying price pressures still simmering, the Monetary Policy Committee has signaled it is in no hurry to cut rates further, prompting traders to fully price in only two 25 basis point rate cuts over the next 12 months.

Conventional private sector wage growth, the indicator the Bank of England watches most closely, was unchanged at 4.8%, in line with the Bank’s own forecast. Officials believe wage growth remains too high to be consistent with the 2% inflation target.

Paul Dales, chief UK economist at Capital Economics, said: “There is little sign that the BoE needs to worry that the loosening in the labor market and the slowdown in basic wage growth is coming to an end. “The slowdown in private sector fixed wages over the past year” suggests that the UK The central bank will continue to gradually cut interest rates.”

The unemployment rate rose more than expected to 4.3% from 4%, although officials were cautious about interpreting the data after problems with the survey’s response rate.

Bank Governor Bailey and other officials are suddenly facing threats to their price stability mission on multiple fronts, including the possibility of a trade war following Trump’s victory in the U.S. election.

The Labor government’s first budget also cast a shadow over the outlook for prices and wages, with Chancellor Rachel Reeves announcing increased borrowing for public investment, another significant increase in the minimum wage and a significant increase in employers’ national insurance contributions.

Businesses may respond by passing on huge tax increases to workers by lowering wage increases, cutting jobs, or raising consumer prices. The Bank of England is unsure how businesses will respond, but noted that room for passing on cost increases currently appears to be “limited” due to weak demand.

Ana Andrade and Dan Hanson of Bloomberg Economics said: “The stickiness of private sector pay growth in September justifies the Bank of England’s cautious easing policy. With the recent budget also further increasing risks from price and wage-setting behavior, we It is believed that the central bank will continue to cut interest rates at a quarterly pace over the next year.”

Although, there is currently evidence of further loosening in the labor market, with both employment and unemployment rising as more people emerge from inactivity and re-enter the labor market. However, the ONS warned that the figures were not entirely reliable due to problems with the Labor Force Survey.

Data from the Office for National Statistics showed that the number of people who were neither in work nor looking for work fell sharply by 162,000 to 9.25 million, the lowest level in the three months to October 2023. The shift resulted in a 220,000 increase in employment and a 50,000 increase in unemployment during the quarter.

The decline in inactivity rates is due to fewer students and fewer people saying they are not working to take care of their families. The number of unemployed people with long-term illness fell by 20,000, an issue the government is grappling with. About 2.78 million people are unable to work due to chronic diseases, 670,000 more than before the epidemic.

The latest labor market data also showed: household finances continued to be boosted by the recovery in real fixed wages, with inflation-adjusted earnings rising by 2.7%, although this was the slowest growth since the first quarter; job vacancies continued to shrink, This showed that labor demand has eased, with job vacancies falling back to 831,000 in the three months to October, still slightly above pre-pandemic levels; total wage growth including bonuses was unexpectedly strong, rising from 3.9% to 4.3%. While this was the first acceleration in six months, the figure was boosted by a one-time bonus for civil servants.