UK pay growth slows as Bank of England mulls rates pause

Growth in pay in Britain – which the Bank of England is watching closely as it weighs up when to pause its run of interest rate hikes – lost pace in the three months to January, official data showed on Tuesday.

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Pay excluding bonuses rose by 6.5 percent compared with 6.7 percent in the three months to December.

Total pay grew by an annual 5.7 percent in the November-to-January period, slowing from 6.0 percent in the previous figures, the Office for National Statistics said.

Economists polled by Reuters had expected basic and total earnings to rise by 6.6 percent and 5.7 percent respectively.

Britain’s unemployment rate held at 3.7 percent in the three months to January, the data also showed.

Economists polled by Reuters had mostly expected the rate to rise to 3.8 percent.

Despite the still strong pace of pay growth, earnings were further diminished by an inflation rate that stood above 10 percent in January.

The ONS said basic pay, when adjusted for inflation using the consumer prices index, fell by 3.5 percent, one of the largest falls since records began in 2001. Total pay fell by 4.4 percent in real terms, the biggest drop since early 2009.

“The jobs market remains strong, but inflation remains too high,” finance minister Jeremy Hunt said after the data was published, a day ahead of his budget speech.

“Tomorrow at the budget, I will set out how we will go further to bear down on inflation, reduce debt and grow the economy, including by helping more people back into work.”

There were some signs of a further easing of the tightness in the labor market with the economic inactivity rate – measuring people out of work and not looking for it – falling by 0.2 percentage points to 21.3 percent, driven mostly by young people.

Vacancies decreased for the eighth time in a row in the three months to February, falling by 51,000 from the previous three months to 1.124 million.

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