“5.75% is absolutely on the table”: Interest Rates Latest

 

The job market is cooling. For the first time in two years, job vacancies have dipped below a million – yet persistent wage growth means yet another interest rate hike may be on the cards.

Employment drops

 

Employment dropped by a greater-than-expected 207,000 in the three months to July, the biggest such fall since the three months to October 2020, the data from the Office for National Statistics showed.

It was another record month for pay growth, however – which most investors think will prompt the Bank of England to raise interest rates again, on Sept. 22, to 5.5% from 5.25%, perhaps for the last time in the current cycle, Reuters reported.

Another hike on the cards?

 

“The bigger question is about the path thereafter,” said Hugh Gimber, global market strategist at J.P. Morgan Asset Management.

“The Bank will be reluctant to keep tightening if they’ve watched other central banks around the world hit pause. Yet if incoming data doesn’t turn definitively, another hike to a terminal rate of 5.75% is absolutely on the table.” 

Wage growth rises

 

Wages continued to rise quickly, and above the rate of inflation. Pay packets excluding bonuses were 7.8% higher than a year earlier – the joint-fastest rate since ONS records began in 2001 and in line with economists’ forecasts in a Reuters poll.

Including bonuses, pay rose by 8.5% compared with the 8.2% consensus, boosted in part by backdated pay for healthcare workers. Adjusting for consumer price inflation it grew 0.6% – the first positive number since March 2022.

“We must stick to our plan to halve inflation”

 

While good news for workers, the level of pay in real terms remains no better than it was more than 15 years ago – a historically dismal record.

“Wage growth remains high, partly reflecting one-off payments to public sector workers, but for real wages to grow sustainably we must stick to our plan to halve inflation,” finance minister Jeremy Hunt said. 

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AUTHOR 

Picture of Chris Bishop

Chris Bishop

Chris Bishop is an award-winning journalist who has been a war correspondent, founding editor of Forbes Magazine, television reporter, presenter, documentary maker and author of two books published by Penguin. Chris has a proven track record of spotting and mentoring talent. He has a keen news sense and strong broadcasting credentials, with impeccable contacts across Africa - where he has worked for 27 years. His latest book, published in February 2023, follows the success of the best-selling “Africa’s Billionaires.”

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