We have been highlighting this issue in the UK for some time now and the Daily Telegraph has this article to add to your week-end reading as the pound continues to attract dip buyers while the recent falls confirm to rally sellers like me that we are on the right strategy still
Weak wage growth will force the Bank of England to revise down its pay forecasts this week, as earnings continue to lag behind price rises despite the strengthening recovery.Average weekly earnings grew by just 0.3% in the three months to May, well below the current inflation rate of 1.9%, according to the Office for National Statistics.The Bank currently expects wage growth to average 2.5%this year, which has already been downgraded from a forecast of 2.75% in February.
Minutes from the Bank’s July meeting show that its staff were perplexed by contrasting wage and employment data. The jobless rate fell to 6.5% in the quarter to May, while the number of people in employment, at 30.6 mln, is at a record high.
The Bank is currently reviewing its assessment of how much more the economy can grow before inflationary pressures begin to emerge.Policymakers could change the weight applied to prices and volumes when judging the amount of slack in the labour market. This would suggest there was more spare capacity than previously thought, although rapid growth has meant slack has been absorbed more quickly in recent months.
But there are also fears that delaying rate increases in anticipation of stronger wages could be stoking inflation, as weak earnings growth has been driven by changes in the labour market, rather than across-the-board pay restraint
Full article here
Wednesday brings us the latest UK unemployment data and the BOE’s inflation report so let’s see what Carney & Co have to say now.
