Today’s labour market figures are a double-edged sword.
Wages are rising at a record pace and are on the cusp of outpacing inflation.
It means our living standards are no longer taking the battering they once were.
That should give ordinary households something to celebrate but it will cause consternation at the Bank of England.
Policymakers have been keeping a close eye on wage growth because they fear that robust pay rises could fuel inflation.
It means they are even more likely to raise interest rates again at the next monetary policy committee meeting on 21 September.
The Bank is likely to raise rates from 5.25% to 5.5% in September but more rate rises will probably follow.
Financial markets now expect the base rate to peak at 6% – up from 5.75% last week.
That’s bad news for anyone rolling off a fixed rate mortgage or sitting on a variable or tracker deal.
Renters are also likely to feel the pain as landlords try to pass on higher mortgage costs.
The Bank has raised interest rates for 14 consecutive times and the full impact of those rate rises is still working its way through the economy.
It’s a tough call for policymakers because even though wages are still rising robustly (helped in part by the big one-off pay rise to millions of NHS workers) there are signs that the economy is weakening.
The inflation rate is falling, and figures released tomorrow will likely show that it fell again in June – from 7.9% to 6.8%.
This is still considerably above the Bank’s 2% target, but it is moving in the right…
