Data released today from the Office for National Statistics showed regular wages, not including bonuses, increased by 6.6% over the year.
But whilst the rate at which wages is rising is slower, it’s also still above inflation, which is currently at 3.9%. So, experts believe this will make the Bank of England’s decision makers reluctant to cut interest rates.
Nicholas Hyett, investment manager at Wealth Club, said: “Wage growth remains above inflation. That’s good news for workers, but together with rising employment may put the Bank of England off cutting interest rates any time soon.
“If the economy can function with interest rates at their current level, why cut? That would bode ill for investors – who have bet big on rates falling this year – and could see share and bond prices fall if rate cuts don’t come through as expected.”
The Bank of England’s monetary policy committee is due to meet next on Thursday 1 February to make its decision on the base rate. Currently it is at 5.25% following three consecutive decisions to pause rate rises.
Although lenders have been cutting prices on fixed-rate mortgages with huge enthusiasm since the start of the new year, a cut in interest rates would come as a welcome boost to those on tracker and variable mortgages.
But, David Hannah, chairman of Cornerstone Tax, said: “With inflation now lower, the Bank of England would be ‘playing with fire’ if they didn’t at least think about a cut to the base rate of interest.
“With a majority of the country’s mortgage lenders engaged in the current price war,” he said, “it’s high time that the Monetary Policy Committee listened to the property market and supported the mortgage sector’s downward momentum, in the end, prioritising prospective homeowners and getting Brits to buy again.”
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