UK Wage Growth Hits Two-Year Low, Bringing Economic Relief

UK wages increased at their slowest rate in over two years with pay rising by 4.9%, aligning with economist predictions. This trend, welcomed by the Bank of England, supports a potential interest rate cut in November as inflation eases. Vacancies fell, signaling a cooling labor market post-pandemic.

British wages grew at their slowest pace in over two years as the country's job vacancies fell once again, according to official data. This development is likely to be welcomed by the Bank of England as it weighs the timing for another potential interest rate cut. Average weekly earnings, excluding bonuses, rose by 4.9% compared to a year earlier from June to August, as reported by the Office for National Statistics, in line with economist forecasts.

The British currency, sterling, showed little movement following the data release. Meanwhile, markets have projected approximately an 80% likelihood of a quarter-point UK interest rate reduction on November 7th. Previously, the Bank cut borrowing costs in August, but maintained them in September pending further evidence of reduced inflationary pressures.

Upcoming data is anticipated to reveal a drop in the UK's consumer prices index to 1.9% in September, beneath the central bank's 2% aim, although core inflation will likely remain stronger, according to economists surveyed by Reuters. Deputy Chief Economist Luke Bartholomew at asset manager abrdn said, 'For now, another interest rate cut in November seems assured. The government's budget announcement at the end of October will further inform future rate decisions.'

(With inputs from agencies.)