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Wages are at their lowest since December 2014 due to inflation rise

Published: 16/02/2017 by Comments

Wages are at their lowest since December 2014 reports the Office for National Statistics. (ONS)

Any increase in wages is not being reflected because of the rise in inflation. In the year to December, there was a 2.6 per cent increase in weekly earnings before inflation was taken into account which brought it down to 1.4 per cent.

Within the next year, inflation is expected to rise at a steady pace. The pound is continuing to decline against the dollar with its lowest being at $1.2407.
The unemployment rate has remained steady at 4.8 percent which is its lowest since September 2005.  The good news is that the employment rate is at an all time high of 74.6 percent.

When making decisions concerning monetary policy, the Bank of England monitors unemployment rates closely. According to financial regulations the bank has to measure inflation against long term unemployment rates.

January consumer prices increased at an annual rate of 1.8 percent, which was below the 2 percent target expected by the Bank of England. The majority of economists are predicting that inflation will rise to three percent as the effects of the declining pound continue to have a negative impact on the economy.

Low unemployment rates are expected to raise the rates of inflation as workers will be able to demand higher pay due to the lack of job competition.

However, the inflexible pay levels have encouraged the Bank of England to re-evaluate the labour market in its inflation report. The bank has decided that there are more problems in the labour market than originally thought.

Monetary Policy Committee member Michael Saunders claims that there is a possibility that unemployment will stay below the five percent mark this year without triggering a rise in interest rates.

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