This could soon change however as it was also confirmed that wage growth is picking up, a key factor in interest rate decision making.
The Bank said there has been ‘a slight firming in wage growth’ with private sector regular pay growth up 2.7% over the year to the end of Q1 2015.
This follows yesterday’s inflation update which revealed the UK had come out of deflation after barely a month with prices up generally by 0.1%.
“Hot on the heels of yesterday’s news that inflation turned positive in May comes encouraging news from the UK labour market,” noted Ben Brettell, senior economist at Hargreaves Lansdown.
“The Bank of England is watching the labour market closely for signs that ‘slack’ in the economy is being taken up before raising interest rates,” he added. “Wage growth is thought to be a particularly important indicator of the degree of slack – subdued wage growth in the recovery thus far has signposted that the economy could grow at a faster rate without pushing up inflation. If the trend we are seeing in wages continues, or accelerates further, this could support the case for higher interest rates sooner rather than later.”
