Key facts
- UK annual wage growth excluding bonuses held at 3.4% in the three months to April.
- The unemployment rate unexpectedly fell to 4.9%.
- Job vacancies decreased to 707,000, the lowest since early 2021.
- The Bank of England voted 7-2 to keep interest rates on hold at 3.75%.
British wages grew faster than expected in the three months to April, with annual growth excluding bonuses holding at 3.4%, according to official data. The unemployment rate unexpectedly dipped to 4.9% from 5.0%, its joint-lowest since mid-2023. These figures emerged hours before the Bank of England announced its interest rate decision, which saw policymakers vote 7-2 to keep rates on hold at 3.75%. Job vacancies also fell to their lowest level since early 2021, signaling a potential slowdown in hiring. The ONS noted that survey response rates are now closer to pre-pandemic levels, improving the readability of labor market trends.
In the minutes of the June meeting, Governor Andrew Bailey stated he was content with holding rates but would respond promptly to any signals of extended elevated energy prices leading to second-round effects. Deputy Governor Sarah Breeden echoed this commitment to acting decisively if material second-round effects become likely. External MPC member Swati Dhingra saw no compelling case for pre-emptive tightening without new evidence of shocks, while Deputy Governor Clare Lombardi indicated policy would need to respond more forcefully if inflation signals persisted above target. External MPC member Catherine Mann questioned waiting to hike, citing research on the quick effect of forceful decisions on inflation expectations. Deputy Governor Dave Ramsden noted holding rates keeps options open, while External MPC member Alan Taylor saw an active hold as reasonable absent worse news. External MPC member Megan Greene advocated for a proactive hike to anchor inflation expectations, a view shared by Chief Economist Hugh Pill who suggested a hike would establish a stance well-placed to address uncertainties.