UK Wage Growth Slows, Strengthening BoE Rate Cut Expectations

Labor Market Data Supports Monetary Easing

The UK's wage growth slowed to 4.6% in the three months to September 2024, according to data released by the Office for National Statistics (ONS). This figure matched expectations from a Reuters poll of economists and represented a decrease from the 4.7% growth recorded in the previous three-month period ending in August. The slowdown in wage growth strengthens the case for the Bank of England (BoE) to cut interest rates at its next meeting.

Economic Implications of Slowing Wage Growth

The moderation in wage growth is seen as a positive development in the context of the BoE's monetary policy deliberations. Slower wage growth suggests that inflationary pressures are easing, which could allow the central bank to adopt a more accommodative stance. The labor market data released by ONS showed that while regular pay (excluding bonuses) growth matched expectations at 4.6%, the overall trend indicates a cooling labor market. This cooling, combined with slowing inflation, creates a favorable environment for potential rate cuts.

Market Expectations and Future Outlook

The release of the wage growth data on November 11, 2024, was seen as a significant factor influencing market expectations regarding the BoE's monetary policy decision next month. Analysts and market participants are now more confident that the BoE will reduce interest rates to support economic growth. The decision will depend on subsequent economic data, particularly inflation figures and overall economic activity indicators. However, the slowing wage growth has bolstered the case for a rate cut, aligning with broader expectations of more accommodative monetary policy in the coming months.