The Bank of England may be persuaded to drop interest rates could drop this summer as the unemployment rate has risen.
The unemployment rate was at 4.2 percent in the latest figures, with total unemployment rising by 85,000 in the December to February quarter, increasing to 1.44 million.
Rob Wood, chief UK economist at Pantheon Macroeconomics, said the rising unemployment rate and payroll fall will “embolden” Bank of England policymakers to look at interest rate cuts.
He said: “There is solid evidence the labour market slowed markedly in March. Rate setters will take note.
“Wages lag labour market slack, so these figures will likely embolden the Monetary Policy Committee to begin cutting interest rates this summer.
The economist said the stronger than expected wage figures complicate the picture, with rises in earnings expected to be pushed higher by this month’s near 10 percent rise in the national living wage.
He explained: “Solid earnings growth in February will, we think, mean rate setters want to wait until June before lowering interest rates, so they can see the post-minimum wage hike data.”
Julian Jessop, economics fellow at the Institute of Economic Affairs, said on X that the latest figures presented “one less excuse for the Bank of England to delay cutting interest rates”.
Annual growth in average regular earnings was at six percent for the quarter.
The latest figures from the ONS (Office for National Statistics) showed there were 106,000 working days lost to labour disputes across the UK in February.
The Bank of England has held the base rate at 5.25 percent since August 2023 with many analysts predicting it will start to drop later this year.
More to follow…
