UK rate cut expectations rise as wage growth eases

Britain’s unemployment rate and growth in wages have eased, official data showed Tuesday, cementing analyst expectations that the Bank of England will resume cutting interest rates next month.

The unemployment rate dipped to 4.0 percent from 4.1 in the three months to the end of August compared with the three months to the end of July, the Office for National Statistics said in a statement.

Annual growth in employees’ average regular earnings dropped to 4.9 percent in the reporting period, the lowest level in more than two years, the ONS added.

The report “adds further support to widespread expectations that the Bank of England will cut interest rates from 5.0 percent to 4.75 percent at the next policy meeting in November”, noted Ashley Webb, UK economist at Capital Economics research group.

At its last policy meeting in September, the BoE decided against consecutive cuts to borrowing costs.

In August, it reduced it key rate for the first time since early 2020, from a 16-year high of 5.25 percent as inflation returned to normal levels.

The ONS will Wednesday present Britain’s latest inflation reading, with the annual level expected to have fallen to below the Bank of England’s target rate of 2.0 percent.