Wage rises make August interest rate cut less likely

MORE sticky-looking numbers on inflation reverberated around the City today, making a rate cut from the Bank of England look less likely next month and helping the pound hold around its highest levels in a year

- Michael Hunter

Wage growth data showed the rate of increase stuck at 5.7% for May — both with and without bonuses — only marginally lower than the previous reading of 6%.

And pay rises in all sectors were running above inflation, which has only recently returned to the BoE’s official 2% target at the headline level.

Bankers’ wages rose by the most, up 6.7%. The smallest rise was in construction, at 3%.

Overall, it leaves pay rising at its fastest pace since the pandemic.

Nicholas Hyett, investment manager at Wealth Club, called it “great news for workers, but less good for the Bank of England”, pointing out “it underpins stubbornly high inflation rates in the service sector.”

The Resolution Foundation, the think tank tracking living standards for people on low and middle incomes, called the wage rises “too hot to handle” for the BoE.