Morgan Newfield - UK Wage Growth Lags Behind Inflation

Morgan Newfield comment as Britain's inflation exceeds wage growth and BoE looks set to increase rates sooner than expected.

Morgan Newfield economists say UK consumer price inflation currently stands at 3 percent and is close to its highest level in six years.

The devaluation of the pound after the UK voted to leave the EU in June 2016, caused inflation to rise as the price of imports soared.

In November last year, the Bank of England raised interest rates for the first time in more than ten years and another rate hike is expected as early as May this year. Last week the BoE left rates unchanged at 0.5 percent.

Morgan Newfield economists believe the lack of wage growth in Britain is cause for concern. Greater wage growth resilience is required especially as the UK lags behind its peers in the global economic recovery.

In the period from September to November last year, wages increased by only 2.4 percent, a strong indication that these figures are not keeping pace with the growing inflation but, with strong job creation figures, there is the talk of another increase in interest rates within the next few months.

A Morgan Newfield economist stated that while policymakers believe the UK is ready for another rate hike, most analysts believe the UK economy will suffer.

Last week, the Bank of England said that it would probably increase interest rates sooner than originally intended and by a greater amount than it planned to last year. The reason for this planned hike is that the BoE feels that the UK economy is being helped by the wider global recovery.

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Source: Morgan Newfield