CITY economists gave warning last night that the Bank of England might be forced to raise interest rates for the third month in succession after the latest figures from the Office for National Statistics showed a steady rise in the growth of basic pay.
Although the headline average earnings rate actually fell — from 5.2 per cent in March to 4.3 per cent in April — economists focused on a steady acceleration in the growth of basic pay, which strips out the effects of City bonuses.
This underlying rate of growth in earnings climbed from 3.4 per cent in November of last year to an annual rate of 4.3 per cent by April — close to the 4.5 per cent level generally seen as the Bank’s “comfort threshold” for wage increases.
The breakdown of yesterday’s figures caused further concern by showing that private companies account for much of the increased pay pressure. Annual wage growth in the private sector is running at 4.4 per cent in April, up from 3.2 per cent in November. In the public sector, average earnings are increasing at a steady rate of 4.3 per cent.
Ross Walker, of RBS Financial Markets, said that he could not rule out a “three-in-a-row hike in July” but added that interest rates would probably not move again until August at the earliest. Upward pressure on pay is being stoked by the continuing steep decline in unemployment.
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Yesterday’s figures showed a further, larger than expected drop of 12,000 in the number of jobless claimants to 862,000. The latest fall, the sharpest since January, took the rate of unemployment to 2.8 per cent, the lowest since May, 1975.