Attention is starting to turn to the Bank of England’s Monetary Policy Committee and their meeting next Thursday (21 September). The mood music from some members of the committee, including the Bank’s governor Andrew Bailey, was that the rate rise cycle had ended.
However, the rather large fly in that ointment was the recently released Office for National Statistics figures for wage growth. The ONS numbers showed total earnings were 8.5% higher in the three months to July 2023 than the corresponding period last year. This figure is good news for pensioners as it forms one part of the “pension triple-lock” and is likely to be the highest of the three leading to pensions rising by 8.5% next year.
What is good for Grandma is not what the Bank of England had hoped for and may lead the way for a 15th successive rise in the base rate. Kitty Ussher, chief economist for the Institute of Directors, is calling for the Bank to (in the words of Rishi Sunak) hold their nerve and keep rates at their current level. She highlighted the large spike in public sector pay deals which have sent the public sector figure (including bonuses) to a rise of 12.2%. Basic pay rises by comparison have risen by 6.6%, lower than July’s rate of inflation at 6.8%.
Yael Selfin, chief economist at KPMG, said “The labour market is starting to feel the weight of slowing activity” highlighting how unemployment rates have risen to 4.3%. In addition, the number of job vacancies has reduced suggesting employees and workers may not be job searching in the quite the same manner as before.