UK wage growth hits 7.3%

Sharecast – Wages grew 7.3%, up from 7.2% in the previous quarter and coming in above expectations for a 7.1% increase. The ONS said that for regular pay, this marks the highest growth rate, which was also seen last month and during the Covid pandemic period for April to June 2021.

Including one-off bonuses, wages rose 6.9% during the period, up from 6.7% and versus expectations of 6.8% growth.

The data also showed that the unemployment rate was 4% in the three months to May, up from 3.8% in the previous three months.

Capital Economics said: “The labour market became less tight in May and there are some signs of momentum in wage growth slowing a bit. But with wage growth still well above the levels consistent with the 2% inflation target, this won’t ease the Bank of England’s inflation fears significantly.

“Our forecast is for the Bank to raise interest rates by 25 basis points (bps) in August, from 5.00% now to 5.25%, but we can’t rule out another 50bps hike. Much will depend on June’s CPI inflation data due next Wednesday.”