Pay growth eases, but Bailey sticks to inflation plan
Bank of England governor Andrew Bailey is sticking to his policy on tackling inflation despite wage pressures showing signs of easing.
The Recruitment and Employment Confederation (REC) and accountancy firm KPMG said increases in starting salaries for permanent and temporary staff were the weakest since April 2021 as staff availability also rose for the fourth month in a row.
The data is in line with the Bank’s expectations that pay growth will weaken and help bring down inflation, currently 8.7%.
Slower wage growth could help soften the Bank of England’s approach to tackling inflation, say some observers.
The Bank of England has raised interest rates 13 times, from 0.1% in December 2021 to 5% last month and is tipped to raise them to between 6% and 7% by the end of the year.
There have been calls for the Bank to raise its 2% inflation target to give it more flexibility and spare some of the pain that is being imposed on businesses and individual borrowers.
But in a speech in France, Bank governor Andrew Bailey defended the 2% target, saying it was low enough that consumers do not have to worry constantly about prices going up when making everyday economic decisions.
Claire Warnes, partner for skills and productivity at KPMG UK, said the sharp upturn in people looking for work reflected a drop in recruitment and increasing redundancies.
REC said uncertainty over the economic outlook weighed on hiring decisions in June.