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What Labour needs to do for pensions and work if it wins election

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Wage data uncertainty to keep interest rates higher

Pedro Goncalves
·Finance Reporter, Yahoo Finance UK
·2-min read
interest rates FILE PHOTO: A general view of the Bank of England (BoE) building in London, Britain, August 4, 2022. REUTERS/Maja Smiejkowska/File Photo
The Bank of England has held interest rates at 5.25%. (REUTERS / Reuters)

Uncertainty about the accuracy of official data and the scale of wage pressures may force the Bank of England (BoE) keep interest rates higher for a longer period.

BoE deputy governor Ben Broadbent said Threadneedle Street needs to see a deeper slowdown in wage inflation before it can consider cutting interest rates.

In a speech at the London Business School, he said that the uncertainty created by the data means “the reaction of policy is likely to be somewhat more delayed than in a world of perfect and complete information”.

Read more: FTSE top trending tickers of 2023

Labor market figures from the Office for National Statistics are being re-examined after a collapse in response rates to its key Labour Force Survey.

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Last week, the latest labour force data showed that wage growth including bonuses fell to 7.2% from 8%.

Broadbent said: “Given the volatility in the official estimates, and the disparity (such as it is) among the various indicators we have, it will probably require a more protracted and clearer decline in these series before the Monetary Policy Committee can safely conclude that things are on a firmly downward trend.”

Last week the BoE kept interest rates at a 15-year high for a third meeting in a row and said again that borrowing costs would probably have to stay elevated for an extended period.

Read more: LIVE: FTSE and European stocks lower ahead of inflation figures

However, investors see a strong chance of a first rate cut by May. A rate cut in June is now fully priced in.

Broadbent voted with the majority of Monetary Policy Committee (MPC) members who backed holding interest rates at a 15-year high of 5.25%.

Watch: Bailey: Bank of England still has more to do

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