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Financial News: Softening UK Wage Growth Boosts Rate Cut Hopes

Softening UK Wage Growth Boosts Rate Cut Hopes

01/16/2024 - 05:52:00 (RTTNews)

(RTTNews) - The UK wage growth softened in the three months to November suggesting that the upward inflationary pressures are cooling, and bolsters the case for interest rate cuts by the Bank of England.

Average earnings including bonuses increased at a slower pace of 6.5 percent in the three months to November after a 7.2 percent gain in the preceding period, the Office for National Statistics said Tuesday.

The actual rate was also weaker than economists' forecast of 6.8 percent.

Excluding bonuses, earnings grew 6.6 percent, matching expectations, but was slower than the 7.2 percent rise in the three months to October.

The jobless rate came in at 4.2 percent in the three months to November, unchanged from three months to October.

Capital Economics economist Ashley Webb said the second bigger-than-expected fall in wage growth in as many months lends some support to the assessment that interest rates will be cut by a quarter basis points to 5.00 percent in June. However, the decision will depend on a broader range of indicators of price pressures, such as CPI inflation and services CPI inflation, the economist noted.

ING economist James Smith said the budget on March 6 will have a strong influence on the timing of the first interest rate cut.

A sizeable package of tax cuts would probably help convince the committee to keep rates higher for a little longer, Smith noted. The economist expects the BoE to start cutting rates in August.

In December, payrolled employees decreased by 24,000 on a monthly basis to 30.2 million, the ONS reported.

The number of vacancies declined 49,000 to 934,000 in October to December. Vacancies decreased for the 18th consecutive period, marking the lowest run of quarterly falls on record.

Data showed that there were 69,000 working days lost in November because of labor disputes. However, this was the lowest number of working days lost since May 2022, the ONS said.

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