{"id":64474,"date":"2025-08-13T17:15:16","date_gmt":"2025-08-13T17:15:16","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/64474\/"},"modified":"2025-08-13T17:15:16","modified_gmt":"2025-08-13T17:15:16","slug":"interest-rate-cut-hopes-fade-amid-stubbornly-high-wage-growth","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/64474\/","title":{"rendered":"Interest rate cut hopes fade amid stubbornly-high wage growth"},"content":{"rendered":"

Unemployment rises and economy slows but wage stats show sticky inflation\u00a0<\/p>\n

By JESSICA CLARK <\/a> <\/p>\n

Updated: 02:55 EDT, 13 August 2025 <\/p>\n

Hopes that the Bank of England will cut interest rates<\/a> in the autumn faded yesterday despite dismal employment figures<\/a> suggesting the jobs market remains under pressure.\u00a0<\/p>\n

Figures from the Office for National Statistics (ONS) showed unemployment in the three months to June remained at 4.7 per cent \u2013 the same as the previous month and the highest since 2021.\u00a0<\/p>\n

And the number of employees on UK payrolls has fallen for six months in a row including a decline of 8,000 in July.\u00a0<\/p>\n

The downturn has been widely blamed on Labour\u2019s national insurance and minimum wage hikes, policies that make it more expensive for employers to hire staff.<\/p>\n

However, economists noted that the pace of the deterioration has slowed compared with previous months.\u00a0<\/p>\n

And wage growth \u2013 when stripping out bonuses \u2013 remained stubbornly high at 5 per cent, a potential cause of inflation<\/a> that may worry rate-setters on the Bank\u2019s Monetary Policy Committee.\u00a0<\/p>\n

\"Governor <\/p>\n

Governor Andrew Bailey cautioned that any subsequent rate cuts must be done \u2018gradually and carefully\u2019<\/p>\n

The figures prompted markets to scale back hopes of an interest rate cut later this year, in a blow to mortgage holders.\u00a0<\/p>\n

A September move is seen as almost certain not to happen and the chances of a rate reduction by the end of the year are little better than 50\/50.\u00a0<\/p>\n

Sterling\u00a0climbed by a cent against the dollar to more than $1.35 \u2013 in a boost to holidaymakers taking a summer break \u2013 and also spiked against the euro to almost \u20ac1.16.\u00a0<\/p>\n

Matt Swannell, chief economic advisor to the EY ITEM Club, said: \u2018No change to interest rates at the MPC\u2019s September meeting looks almost certain, while a skipped cut at the November meeting is a distinct possibility.\u2019\u00a0<\/p>\n

The Bank of England is divided over interest rates because the economy and jobs market appears to be stagnating while at the same time inflation is\u00a0stubbornly high.\u00a0<\/p>\n

Some MPC members think rates need to be cut to offset the effects of a downturn while others are more worried about inflation and think rates should stay high.\u00a0<\/p>\n

That led to an unprecedented split last week when they voted by the narrowest of margins to cut rates to 4 per cent.\u00a0<\/p>\n

But the meeting highlighted that the Bank is increasingly worried about inflation, which it now expects to hit 4 per cent later this year, double its 2 per cent target.\u00a0<\/p>\n

Governor Andrew Bailey cautioned that any subsequent rate\u00a0cuts must be done \u2018gradually and carefully\u2019.\u00a0<\/p>\n

Andrew Wishart at Berenberg said yesterday: \u2018Pay growth remains well above the 3 per cent year-on-year rate which is usually consistent with 2 per cent consumer price inflation.\u00a0<\/p>\n

We thus expect the Bank to keep some pressure on the brakes by holding off from another interest rate cut until 2026.\u2019\u00a0<\/p>\n

James Smith, UK economist at ING Bank, said: \u2018The Bank can still afford to cut rates in November, though after last week\u2019s hawkish meeting, this call has become less clear-cut.’<\/p>\n

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\n Interest rate cut hopes fade amid stubbornly-high wage growth<\/p>\n