Published On: Thu, Mar 14th, 2024

Bank of England under pressure to bring forward interest rate cuts | Personal Finance | Finance

A slowdown in wage rises has raised hopes the Bank of England will have room to bring forward cuts in the base interest rate.

Lower wage growth has helped to ease concerns about inflation, which is predicted to fall to the target rate of two percent in the next few months.

Market analysts have been predicting that the Bank of England’s Monetary Policy Committee (MPC) will cut the base rate in August or possibly June.

However, the good news on wage growth and inflation could, potentially, pull this forward.

The Governor of the Bank of England, Andrew Bailey, and the MPC have been criticised for being too slow to cut rates, which is putting a squeeze on consumers and the wider economy.

However, he has rejected these complaints, warning the world is “a much more uncertain and dangerous place than we have been used to”.

Figures from the Office for National Statistics (ONS) showed wage growth slowed from 6.2 percent to 6.1 percent in January.

At the same time, unemployment climbed to 3.9 percent in the three months to January, up from 3.8 percent, while job vacancies fell to 908,000.

George Buckley, chief European economist at investment bank Nomura, said: “As we head through the year, we expect the pressure for the Bank to cut rates to build, with labour market data being a key factor in the decision making.”

Traders have been betting a rate cut will not happen until August but see a roughly 50/50 chance it could happen as soon as June.

Appearing before the House of Lords economics committee on Wednesday, Mr Bailey said it was “encouraging” that inflation had remained unchanged at four percent in January.

But he said the Bank’s monetary policy committee wants to see more evidence of a cooling in wage rises before acting on interest rates.

Mr Bailey said there are signs of a “modest pick-up” in the economy that is expected to continue through the year.

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