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(Bloomberg) — UK wages are growing faster than at almost any time in at least two decades, keeping pressure on the Bank of England to raise interest rates despite a worsening economic outlook.
Official figures on Tuesday showed average earnings excluding bonuses were 6.1% higher in the three months to October than a year earlier. That’s the highest since records began in 2001, excluding the height of the coronavirus pandemic.
The jump reflects labor shortages that remain chronic despite a cost-of-living crisis that is set to drag the UK into a prolonged recession, if it has not already done so. That shortage has been exacerbated by the loss of millions of workers over the past two years.
The BOE has raised interest rates eight times in the past 12 months in an effort to avoid a wage-price spiral. Investors expect another half-point hike on Thursday, which would take the benchmark rate to a 14-year high of 3.5%.
However, given the dire state of the economy, decisions on how fast to tighten policy are expected to be driven by deep divisions among policymakers.
–With assistance from Ben Sills.
©2022 Bloomberg LP
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