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Official data showed that UK wage growth slowed in the three months to July. Payroll employment and hiring weakened during this period. The Office for National Statistics reported that annual earnings growth, excluding bonuses, decreased to 5.1 per cent from 5.4 per cent in the previous three months to May. This was in line with what analysts had predicted.
According to the ONS, tax records revealed that payrolled employment dropped by 6,000 in July and by 59,000 in August. The Bank of England’s monetary policy committee wants to see clear signs that the pay pressures causing service price inflation are easing before they decide to reduce interest rates further. They had already cut the bank rate to 5 per cent in August.
The wage figures will impact next year’s increase in the state pension, which is determined by the higher of wage growth and inflation from the previous September, or 2.5 per cent. Other business surveys indicate that pay growth is slowing down gradually from record highs. However, economic activity has been picking up in recent months.
Economists suggest that the Bank of England may be more cautious about reducing interest rates compared to the US Federal Reserve or the European Central Bank. This is because the labor market is not showing as clear signs of weakening as in the US, and inflation has sharply decreased in the Eurozone. Despite these developments, the pound only rose by 0.05 per cent to $1.3079 in response to the wage data.
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