Sterling dips as wage growth unexpectedly slows

Listen to this article

00:00
00:00

The pound has fallen after figures showed an unexpected slowdown in UK wage growth at the end of last year.

Sterling slid against the dollar, losing 0.4 per cent on the day to a low of $1.2422 after figures from the Office for National Statistics showed wage growth cooled to 2.6 per cent in the final three months of the year, down from growth of 2.7 per cent in the previous quarter.

Analysts had expected the wage growth rate to remain steady at 2.7 per cent.

The pound is now trading close to its weakest level in a month after losing ground on Tuesday against the dollar following comments by Federal Reserve chair Janet Yellen that were interpreted as increasing the likelihood of interest rate rises in the US.

The Bank of England is monitoring wage growth as it considers whether to tighten monetary policy. Mark Carney, governor of the Bank of England, said this month that if there was faster growth of wages there could be an adjustment of interest rates.

But the BoE in November revised downwards its forecasts for unemployment, with a previous prediction of a rise from the current 4.8 per cent to 5.6 per cent by the start of 2019 changed to no higher than 5 per cent.

Chart from Bloomberg

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from FT.com and redistribute by email or post to the web.