Sluggish Wage Growth Keeps Pressure off the BoE for a Rate Hike

Wage growth in Britain slowed in the three months to November even though unemployment fell to its lowest since early 2006, underlining why the Bank of England is saying it will take its time before raising interest rates.

Pay rises were the weakest since the three months to February, official data showed on Wednesday. Sterling nevertheless edged up as investors focussed on strong job creation that took the unemployment rate to 5.1 percent.

The rapid fall in joblessness since 2013 has wrong footed the British central bank, which had expected wage growth to pick up more quickly than it has.

BoE Governor Mark Carney said on Tuesday that the Bank had no timetable for raising interest rates and that the level of unemployment at which wages become inflationary could be lower than previously thought.

The puzzlingly weak performance in pay has been linked to factors such as the strong flow of migrant workers coming to Britain and employees choosing to work fewer hours.


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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.