The central bank noted that while there may be temporary volatility in the wage data, “it could also be that lower headline readings of inflation have acted to limit recent nominal pay growth, despite the tightening labor market”.
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Data released in November by the ONS showed that real wages grew by 1.9% in the year to April, the end of a long running stagnation of growth dating back to the aftermath of the financial crisis.
The jobless rate fell to 5.2 percent, the least since May 2008, from 5.3 percent in the third quarter, the Office for National Statistics said on Wednesday.
“On the one hand… the weaker earnings figures fit with what the BoE has been saying recently: that the pace of wage growth has started to level off, and that’s buying them a little more leeway in the near term before raising rates”, he said.
He added the data from 2015 suggested the United Kingdom could continue with steady growth, low inflation and low rates, with the BoE “focused on curbing excessive credit growth to ensure the economy isn’t overly reliant on debt”.
Economists say that the continuing slump in global commodity prices, the continuing supermarket price war and the strong pound hurting exports will all keep inflation in check and limit the scope for interest rate rises. Members voted 8-1 against increasing the Bank’s basic interest by 0.25%.
‘So I judge it prudent to tread carefully, and refrain from voting for an increase in Bank Rate until I am convinced that wage growth will be sustained at a level consistent with inflation returning to target’.
Financial markets are now pricing in a United Kingdom rate hike around the end of next year, while economists polled by Reuters mostly expect it to happen by mid-2016.
‘And although the downward pressure on inflation from movements in energy prices and the exchange rate are proving persistent, they will not have a permanent effect on inflation’. Total wage growth is calculated as annual growth in seasonally-adjusted average weekly earnings total pay.
When the MPC comes to meet again in January it will likely have to take into account continued falling oil prices, with Brent Crude at 37.35 U.S. dollars a barrel on Tuesday against the price in July 2014 of above 110 U.S. dollars a barrel, and a rate-rise from the U.S. Federal Reserve.
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He said: “Inflation should still take a very long time to make the 2 per cent target, meaning that the MPC is under no pressure to follow the US Fed, which looks set to raise interest rates”. “Having said that, I think all agents, and all members of the MPC, expect the future path to be gradual and limited”, she said.
