18 Jun 2015
GBP: higher wage growth beginning to materialize – BTMU
FXStreet (Barcelona) - Lee Hardman, Currency Analyst at Bank of Tokyo-Mitsubishi UFJ, comments on the UK labour market tightening and the impact on GBP and UK rates ahead.
Key Quotes
“The pound has continued to strengthen following the release of the latest UK labour market report which revealed stronger than expected earnings growth. The report revealed that private sector total earnings increased by an annual rate of 3.3% which was the fastest rate since August 2008.”
“The latest MPC minutes acknowledged the pick-up in wage growth and noted as well that it may even be stronger than reported in the official data. The wage data is reassuring to the BoE which had previously cautioned that current very low inflation may dampen wage growth, although developments will need to be monitored in the coming months as well.”
“A further tightening of labour market conditions and higher wage growth will increase pressure on the BoE to begin raising rates once it judges that risks to inflation have shifted to the upside. However, the erosion of spare capacity may result in the UK economy shifting to a slower pace of growth if productivity growth continues to remain weak.”
Key Quotes
“The pound has continued to strengthen following the release of the latest UK labour market report which revealed stronger than expected earnings growth. The report revealed that private sector total earnings increased by an annual rate of 3.3% which was the fastest rate since August 2008.”
“The latest MPC minutes acknowledged the pick-up in wage growth and noted as well that it may even be stronger than reported in the official data. The wage data is reassuring to the BoE which had previously cautioned that current very low inflation may dampen wage growth, although developments will need to be monitored in the coming months as well.”
“A further tightening of labour market conditions and higher wage growth will increase pressure on the BoE to begin raising rates once it judges that risks to inflation have shifted to the upside. However, the erosion of spare capacity may result in the UK economy shifting to a slower pace of growth if productivity growth continues to remain weak.”