Record-breaking wage growth outside of pandemic times is placing significant pressure on the Bank of England, compelling it to continue increasing interest rates to circumvent an inflationary vortex.
Excluding bonuses, regular pay surged by 7.2% in the three-month period leading to April, as reported by the Office for National Statistics. This figure surpasses economists’ forecast of 6.9% and is above the upwardly adjusted 6.8% from the previous three months.
The private sector observed the most significant pay growth outside of pandemic conditions, with an increase of 7.6%. At the same time, the public sector saw a 5.6% pay rise, the highest since the period from August to October 2003.
These recent figures will bring unease to Threadneedle Street.
The Bank of England’s rate decision-makers are predicted to hike interest rates for the 13th time in a row next week, posing a challenge for households.
Policy designers consider wage growth as a key sign of inflation’s increasing entrenchment in the economy, even as the initial impact of the energy crisis diminishes.
Notwithstanding these surging wage figures, employees continue to experience a decline in real wages, as soaring inflation at 8.7% diminishes any pay rises, heavily impacting households.
Real pay, including bonuses, fell by 2%, a decrease from 3% in the period from January to March.
