UK pay growth slows but probably still too high for BoE

British wage growth slowed more than expected in the three months to the end of October, official data showed, but pay is probably still increasing too quickly to persuade the Bank of England to cut interest rates any time soon.

Earnings excluding bonuses were 7.3 per cent higher than a year earlier, the figures from the Office for National Statistics (ONS) showed on Tuesday.

Economists polled by Reuters had forecast a 7.4 per cent rise.

The figure represented a slowdown in regular pay growth from an upwardly revised reading of 7.8 per cent growth in the three months to September and from a peak of 7.9 per cent immediately before that, the highest since the ONS began collecting the data in 2001.

Including bonuses, which are typically volatile, pay growth slowed to 7.2 per cent from 8.0 per cent in the three months to September.

The BoE is worried that pay growth, especially in the private sector, is still too strong to get inflation down to its 2 per cent target, even as the broader economy stagnates.

Earnings excluding bonuses in the private sector dropped to 7.3 per cent in the three months to October compared with 7.9 per cent in the July-September period.

The central bank raised interest rates 14 times in a row between December 2021 and August this year, since when it has kept rates on hold. It is expected to keep borrowing costs unchanged again on Thursday.

However, officials have stressed that they are not close to thinking about cutting borrowing costs.

Sterling weakened briefly against the US dollar after the ONS released its figures.

Tuesday’s data also showed that Britain’s unemployment rate held at 4.2 per cent in the three months to September while employment rose by 50,000 people.

The ONS has said those figures may not prove reliable as it has had to change the way that it measures the jobs market via its monthly Labour Force Survey because of a drop in the number of responses it receives.