Today’s labour market figures are a double-edged sword.
Wages are rising at a file tempo and are on the cusp of outpacing inflation.
It means our residing requirements are now not taking the battering they as soon as had been.
That ought to give peculiar households one thing to have fun however it can trigger consternation on the Bank of England.
Policymakers have been protecting an in depth eye on wage progress as a result of they worry that strong pay rises may gas inflation.
It means they’re much more prone to elevate rates of interest once more on the subsequent financial coverage committee assembly on 21 September.
The Bank is prone to elevate charges from 5.25% to five.5% in September however extra fee rises will most likely comply with.
Financial markets now count on the bottom fee to peak at 6% – up from 5.75% final week.
That’s dangerous information for anybody rolling off a hard and fast fee mortgage or sitting on a variable or tracker deal.
Renters are additionally prone to really feel the ache as landlords attempt to move on greater mortgage prices.
The Bank has raised rates of interest for 14 consecutive instances and the complete impression of these fee rises remains to be working its manner by the economic system.
It’s a tricky name for policymakers as a result of regardless that wages are nonetheless rising robustly (helped partially by the large one-off pay rise to hundreds of thousands of NHS staff) there are indicators that the economic system is weakening.
The inflation fee is falling, and figures launched tomorrow will probably present that it fell once more in June – from 7.9% to six.8%.
This remains to be significantly above the Bank’s 2% goal, however it’s shifting in the precise course.
Rising rates of interest are additionally taking their toll on the roles market – the unemployment fee jumped from 4% to 4.2%. So, there are many indicators that financial tightening is taking some steam out of the UK economic system.
Members of the Monetary Policy Committee must weigh up all the info and make a judgement concerning the development that wages, unemployment and inflation are prone to comply with over the approaching months.
Not solely is inflation anticipated to drop quickly however so is wage progress.
Samuel Tombs, economist at Pantheon Macroeconomics, mentioned: “It usually takes time for changes in labour market tightness to feed through to wage growth, and several survey indicators now point to slowing wage increases.”
However, he added: “The momentum in wage growth still is too strong for the committee to take a break just yet.”
Source: information.sky.com”