14 June 2007
Figures from April this year showed that the average wage increase has slowed considerably, prompting optimists to state that this may lead to a slowly down of the interest rate rises which have blighted borrowers for the past six months.
The Office for National Statistics said earnings growth slowed sharply to 4% in March - well below earlier forecasts of 4.5%, but this won't be enough to prevent the Bank of England increasing the base rate of interest, according to Vicky Redwood of Capital Economics.
Ms Redwood told the Guardian that wage growth wasn't an important enough factor on the UK's inflation rate to be able to sway the monetary policy committee's (MPC's) vote. Her colleague Jonathon Loynes also said that rate rise was likely, even in the event of a fall in inflation as the MPC is clearly focussed on the medium to long-term threat.
Inflation figures have fallen from the decade-high of 3.1% reported earlier this year to around 2.8%, which is still well above the government's self-set target of 2%. This, according to Mervyn King, the governor of the Bank of England, will be the deciding factor in future rate rises.
He commented earlier this week that despite the slight downward turn of the inflation rate, further action may be needed to rein inflation back to the 2% target "if the economy continues to grow above its limits".
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