UK wage growth falls to lowest in two years, unemployment falls By Reuters

LONDON (Reuters) – British average weekly earnings, excluding bonuses, were 5.4 percent higher than a year earlier in the three months to the end of June, the Office for National Statistics said on Tuesday.

Economists polled by Reuters had forecast regular wage growth of 5.4 percent.

The Bank of England said it would continue to keep a close eye on wage growth when it cuts interest rates on August 1, after holding them at a 16-year high of 5.25% for almost a year.

Ordinary wages rose at about twice the pace the BoE sees as consistent with keeping inflation at its 2% target over the medium term, and the central bank expects data on Wednesday to show inflation back above target.

However, employers expect lower headline inflation to reduce pressure to raise wages next year. The Chartered Institute of Personnel and Development said on Monday that employers expected to raise wages by 3% – the lowest expectation in two years – while a BoE survey indicated pay rises of 4.1%.

Last month, newly elected Labor finance minister Rachel Reeves approved pay rises of at least 5 per cent for millions of public sector workers, including a 22 per cent rise for junior doctors over two years, to resolve a long-standing industrial dispute.

The BoE is focusing more on private sector wage growth, which it says has a more direct impact on inflation and expects it to slow to 5% in the final quarter of this year and 3% at the end of 2025.