- UK wage inflation is too high to be consistent with the Bank of England’s 2% inflation target.
- We expect the data to improve significantly over the next six months.
- Month-on-month numbers have shown a big slowdown and unemployment is ticking up.
- Labour market pressures are easing. Non-UK workers are coming back and others who left the workforce during the pandemic are returning too.
- Inflation is also trending down, and this will reduce pressure on wage growth.
- We believe that markets will begin to price in rate cuts early in 2024 with the first reductions at some point in the spring. The Federal Reserve will likely be first to move with the Bank of England at some point later in 2024.