The UK wage growth sets Bank of England for August rate hike

• The UK labor market report for June came out largely in line with market expectations, setting the stage for the Bank of England to hike in August.
• The UK wages for 2.5% y/y in three months ending in May including bonuses while rising 2.7% excluding bonuses at the same time.
• The claimant count rose slightly, but the unemployment rate remained stagnant at four decades low of 4.2%.

The UK labor market report in June came out in line with the market expectations, especially with wages rising 2.5% over the year including bonuses while decelerating to 2.7% over the year in three months ending in May, the Office for National Statistics informed on Tuesday.

The number of unemployment benefit seekers in June increased by 7.8K in June after the revised drop of 3.0K in May, but the unemployment rate remained stagnant at four decades low of 4.2%.

The employment rate representing the proportion of people aged from 16 to 64 years who were in work rose to  75.7% in June, the highest since comparable records began in 1971.

With the UK labor market remaining strong in historical basis and the wages rising above the estimated inflation rate, the growth prospects are improving giving the Bank of England another reason to go ahead with the rate hike as early as August 2, this year together with the release of August Inflation Report that will be accompanied with the press conference of the Governor Mark Carney.

This is playing well into the Bank’sd strategy as the Bank of England turned hawkish in June voting 6-3 in favor of keeping the Bank rate steady, but the hawkish camp strengthened with the Bank of England chief economist Andy Haldane joining the camp of Ian McCafferty and Michael Sauders. 

UK wages