- Chancellor Jeremy Hunt said it was positive that inflation was continuing to fall
- Inflation fell from 11.1 percent last fall to 4.6 percent today
Hopes for a rate cut in the first half of next year have been strengthened after official figures yesterday showed wage growth has slowed sharply.
According to the Office for National Statistics, the average weekly wage increased by 7.3 percent in the three months to October compared to the same period last year.
While that is still a strong level of growth, it is down from 7.8 percent the month before – marking the biggest drop in almost two years.
And it appears to add to evidence that the Bank of England's painful interest rate medicine is doing its job in cooling the economy and easing inflationary pressures.
The wage figures are likely to have little impact on this week's Bank of England interest rate decision.
The Bank is widely expected to leave the key interest rate unchanged at 5.25 percent on Thursday.
But financial markets will be closely watching the Bank's language for clues about when it will decide to start cutting spending.
This appears to add to evidence that the Bank of England's painful interest rate medicine (pictured) is doing its job by cooling the economy and easing inflationary pressures.
Traders are betting that interest rates will start to fall from June, while some now think this could happen in May.
However, the Bank has so far resisted these market expectations, saying they underestimated how persistent inflation could be.
Inflation has fallen sharply from a high of 11.1 percent last autumn to 4.6 percent now, but the Bank's target is for it to fall to 2 percent.
The fall in wage growth, together with stagnant GDP, could convince some members of the Bank's rate-setting Monetary Policy Committee (MPC), who have been calling for rate hikes, to change course now and vote to keep them in to put on hold, experts say.
The figure also showed that unemployment remained unchanged at 4.2 percent.
And in another sign of the labor market's cooling, data showed job vacancies in the economy fell for the seventeenth month in a row in the three months to November, the longest period of decline on record.
However, the number of vacancies remains at a historically high level at 949,000.
Despite the slowdown in wage growth, it wasn't all gloom for British workers, as falling inflation means wages are rising faster than prices.
The latest figures show wages are rising by 1.2 percent in real terms, the strongest pace since September 2021.
Chancellor Jeremy Hunt said: 'It is positive to see inflation continuing to fall and real wages continuing to rise.'
Chancellor Jeremy Hunt said it was positive to see inflation continuing to fall and 'real wages rising'
The figures will add to hopes of a so-called 'soft landing' for Britain – in which inflation is brought under control without the economy slowing so much that it falls into recession.
Elizabeth Martins, British senior economist at HSBC, said: 'We think this publication is quite positive for Britain: the labor market appears to be declining, without any increase in unemployment (yet), and real incomes are rising again. again.
'Of course nothing lasts forever; any or all of these trends may change or reverse. But given some predictions from this time last year, it could be much worse.”
Martin Beck, chief economic adviser to forecasters EY ITEM Club, said: 'The wages data are now clearly moving in the right direction from the Monetary Policy Committee's perspective.
'But given that annual wage growth is still more than twice as fast as would be consistent with the Bank of England's inflation target of 2 per cent, the MPC is likely to stick with its 'high for longer' message for some time to come. '. while yet.'