LONDON – British wages, excluding bonuses, grew at their slowest pace since October 2022 during the three months to the end of January, while the unemployment rate edged up unexpectedly, according to data that may slightly ease the Bank of England’s (BOE) inflation worries.

Regular wage growth dropped to 6.1 per cent in the three months to end-January from 6.2 per cent in the final quarter of 2023, the Office for National Statistics (ONS) said.

Economists had expected another reading of 6.2 per cent.

The unemployment rate rose to 3.9 per cent from 3.8 per cent, reversing a dip in the final quarter of 2023, although the ONS is still in the process of overhauling its survey of households.

The pound sterling weakened against the United States dollar and euro immediately after the labour market data was published.

On March 11, the ONS said there was greater uncertainty than usual about the unemployment rate, equivalent to around 0.1 percentage point in either direction, due to a problem with analysing labour data from Northern Ireland.

The BOE has identified wage growth and services price inflation as the two most important indicators for whether underlying inflation pressures are easing enough for it to cut interest rates.

Wage growth is running at roughly double its rate before the Covid-19 pandemic, when inflation was close to its 2 per cent target.

While some top BOE officials expect wage growth to drift lower as headline inflation falls, others fear that labour shortages since the pandemic will make this a slow process.

“Today’s data is unlikely to warrant a major policy shift from the Bank of England, particularly with pay growth still robust and continued worries it could lead to a persistence in price pressures,” said Ms Yael Selfin, chief economist at KPMG in the United Kingdom.

“However, we expect the labour market to weaken in the coming months, which should reduce momentum in wage growth and raise the prospect of interest rate cuts from the summer onwards.”

BOE policymaker Catherine Mann, who has been calling for further increases in borrowing costs, said on March 11 that there was still “a long way” to go for inflation pressures to be consistent with the central bank’s 2 per cent target. REUTERS