-First "real wage" increase in 12 months seals deal on BoE rate hike. The figures mean that United Kingdom workers are now getting a small real wage rise on average.
Average wages in Britain are rising faster than prices for the first time in about a year, official figures showed Tuesday, a development that will likely fuel expectations that the Bank of England will raise interest rates again next month. "Markets are now pricing in an 85 percent chance of a rate rise". An ONS spokesman said bonus payments in February were lower than a year earlier but it was too soon to draw conclusions about the bonus season as a whole.
The figures from the Office for National Statistics (ONS) signal an end to the squeeze on household incomes after the slump in the pound following the Brexit vote drove the cost of living higher. With unemployment at its lowest level since the 1970s, employers have begun raising pay for staff more quickly, though by less than increases of about 4 percent a year before the financial crisis. The surprise vote led to a sharp fall in the value of the pound, which raised the cost of imported goods, notably food and energy.
Halpenny suggests Sterling's rise against the Euro is an indication that the currency is now appreciating based on its own merits, rather than the weakness of other currencies. Meanwhile, the British currency actually posted a minor loss against the Euro a year ago.
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Inflation had topped 3% in recent months but more recently has eased, meaning that according to the latest figures wages, stripping out bonuses, are now growing in real terms by 0.2% - the first positive reading since the three months to January 2017.
The Bank of England has hinted it could raise its main interest rate by a quarter-point to 0.75 percent at its May 10 meeting to get inflation back to its 2 percent target. Since then, inflation has fallen faster than forecast, down from 3% to 2.7%, but the outlook for wage growth has firmed. What is clear however, is that a failure to raise rates in May will be bad for Pound Sterling.
As well as expectations of higher interest rates, the currency has been buoyed by waning concerns over Brexit after the British government agreed on the outlines of a transition deal with the European Union after it leaves in March 2019.
At 1.1585, Sterling remains 13% lower against the Euro than it was on the morning of the Brexit referendum while the Pound-to-Dollar rate is only 1.1% below the 1.45 level it was at before the result became known.