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UK pay growth lags behind Inflation

Sterling got only a temporary boost from data showing British wage growth edged above forecasts this morning, rising briefly against the dollar before dropping off again.

British pay growth has lagged behind inflation again, official data showed, but the figures are likely to cement expectations among investors that the Bank of England will soon raise interest rates for the first time in a decade.

The data also showed the unemployment rate between June and August held at its 42-year low of 4.3 percent, one of the reasons why the BoE thinks pay is likely to pick up soon.

Despite a slowdown in Britain’s economy this year, the central bank is widely expected to increase its Bank Rate to 0.50 percent from an all-time low of 0.25 percent on Nov. 2, at the end of its next meeting.

The BoE has said it expects pay growth to pick up speed soon because the unemployment rate is below the 4.5 percent level that it considers to be a trigger for inflation pressure in the economy. It also thinks Brexit will increase price growth in Britain.

The Office for National Statistics said today that workers’ total earnings, including bonuses, rose by an annual 2.2 percent in the three months to August and it slightly revised up growth in the three months to July to 2.2 percent as well.

Excluding bonuses, earnings rose by 2.1 percent, a touch stronger than the Reuters poll forecast of 2.0 percent.

Wages have steadily fallen behind inflation which hit 3 percent in September, its highest level in more than five years.

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