The trajectory of UK wage growth will be a “crucial judgment” for the Bank of England’s Monetary Policy Committee as it considers future interest rate cuts, according to Governor Andrew Bailey. He expects a decline in wage settlements, offering a potential path for rate reductions despite global trade uncertainties.
Bailey told MPs that he has “no evidence to doubt the steer from our agents’ pay survey that come the end of this year … wage settlements should be around 3.7% to 3.8%.” This projected moderation is a key domestic factor in the Bank’s policy considerations.
Despite this positive domestic outlook, Bailey reiterated his concerns about the impact of Donald Trump’s “chaotic trade policy” on the global economy and, consequently, on the broader uncertainty surrounding the timing and extent of UK rate adjustments.