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"Sticky wage growth could see that first cut from the Bank of England prove as elusive as the British summer"

ended 11. June 2024

This morning, the ONS revealed that unemployment edged up to 4.4% and that annual growth in regular earnings (excluding bonuses) was 6.0%, the same as for the previous three-month period; and annual growth in employees’ average total earnings (including bonuses) was 5.9%, the same as for the previous three-month period. In short, wage growth is proving sticky. Brokers shared their views on whether that first cut from the Bank of England could now be delayed. Their views are below.

9 responses from the Newspage community

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Michelle Lawson
Director at Lawson Financial
The wage growth data published today may be good for the pocket but it's bad for inflation, and bad for borrowers. Sticky wage growth could see that first cut from the Bank of England prove as elusive as the British summer.
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Ben Perks
Managing Director at Orchard Financial Advisers
This data should not cause the Bank of England to delay, in fact it endorses the reasons to reduce this month. Unemployment is up and wage growth has only been triggered by the recent increase to the national living wage, which has risen as people are struggling to pay bills and put food on the table. The time to act is now. Hopefully the Monetary Policy Committee will follow our friends in Europe and not wait for the US, as a cut across the pond could be months away.
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Simon Bridgland
Director at Charwin Private Clients
That first rate cut is proving a shimmering mirage. We can see it in the distance but is it real? With wage growth holding firm as it did in the first quarter, and unemployment pressing on the government’s coffers, a cut to Bank Rate won’t be happening yet. The election is likely to further exasperate any hope of a base rate reduction until much later in the year.
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Craig Fish
Director at Lodestone Mortgages
This has certainly thrown a cat among the pigeons, and it looks like the slim chance of a rate cut in June might just have got a little slimmer. However, it's not completely off the cards. Wage growth is normally something to be really pleased about, but it still doesn't feel like we have more money in our pockets due to massively increased mortgage and rent costs. It's paradoxical that the higher wage growth we wish for is the same thing that is stopping us from getting the other thing we all want, lower interest rates.
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Justin Moy
Managing Director at EHF Mortgages
Wage increases are being dictated by the sharp increases in mortgage and household costs. One has to give to allow the other to fall back in line. With only a third of UK homeowners with a mortgage, the direct link between pay and rates is not as clear as first suggested, and should largely be ignored by the MPC ahead of their next meeting. The high savings rates for those with cash deposits are as much of an issue, as people continue to spend on higher ticket items and services, fuelling inflation. We should still see a rate cut over the summer.
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Ranald Mitchell
Director at bad credit mortgage specialists Charwin Mortgages
Wage growth has been outpacing inflation for several months, becoming an increasingly significant issue. While this could signal the final phase of the current adjustment, if it doesn't slow down soon, interest rates are likely to remain high for a longer period. This is not favourable news for borrowers.
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Riz Malik
Independent Financial Adviser at R3 Wealth
June could still see the first Bank of England rate cut since 2020 as unemployment rises and the number of vacancies falls. If the inflation print due this month doesn't open a can of worms, we may be in for a treat.
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Katy Eatenton
Mortgage & Protection Specialist at Eatenton Finance
Yet another reason foer the Bank of England to keep the base rate steady. This year is rapidly becoming as uninspiring for borrowers as last year was. Luckily, the UK is nothing if not resilient and the market is still moving and holding up its own.
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Graham Cox
Director at Bridging Hub
Sticky wage growth nearly three times inflation will be of huge concern for the Bank of England and could stall that much anticipated first base rate cut. However, unemployment is creeping up which should temper wage demands over the coming months and give Andrew Bailey the justification to lower the base rate later this year..