The pound fell yesterday after figures showing a slowdown in wage growth boosted expectations that the Bank of England will not need to raise interest rates next month.
Sterling dipped by nearly a cent to as low as $1.2132 after the Office for National Statistics (ONS) said average earnings grew by 7.8 per cent in the three months to August.
That was down only slightly compared with the record 7.9 per cent seen the previous month.
Rate expectations: Sterling dipped by nearly a cent to as low as $1.2132 after the Office for National Statistics said average earnings grew by 7.8% in the three months to August
But it was the first time the figure had fallen since January and Ashley Webb, UK economist at Capital Economics, said the data suggested that ‘wage growth has passed its peak’.
The Bank of England is closely watching the jobs market to see where whether inflation pressures are persisting or starting to fade.
It has increased rates 14 times as it tries to bring down inflation – which remains well above its 2 per cent target – but paused last month in a knife-edge 5-4 split decision.
Inflation figures for September published today could change the picture again.
But yesterday’s ONS data showed that alongside slowing wage growth, vacancies fell and the total number of payrolled employees also dropped slightly.
Following the figures, financial markets saw a 77 per cent chance that rates would remain on hold at 5.25 per centwhen the Bank of England’s Monetary Policy Committee meets next month.
George Buckley, chief UK and euro area economist at Nomura, said: ‘Payrolls have now fallen for three consecutive months, albeit modestly and subject to revision, while earnings growth clearly slowed from earlier in the year.’
