Slower wage growth could see rates cut later this year

Wage growth has slowed to its lowest level for more than two years, which economists say could clear the path for more interest-rate cuts by the Bank of England later this year despite worries over persistent inflation.

- JOE MIDDLETON

The Office for National Statistics (ONS) revealed yesterday that wage growth was 5.4 per cent year on year over the three months to June, down from 5.7 per cent in the previous three months. It represented the smallest increase since the period to July 2022. The data found that UK workers saw an average increase of 2.4 per cent once inflation was taken into account.

“The further easing in wage growth will be welcomed by the Bank of England as a sign that labour-market conditions are continuing to cool,” said Ruth Gregory, deputy chief UK economist at consultancy Capital Economics. “This lends some support to our forecast that the Bank of England will press ahead with two more 25bps [basis points] interest-rate cuts later this year.”

The statistics agency also said that the rate of unemployment was 4.2 per cent over the three months to June, dropping from 4.4 per cent over the previous three months.