UK unemployment remains at its lowest level since 1975, according to the latest figures from the Office of National Statistics.
Wages, however, have still failed to keep pace with inflation which now stands at 3 percent – its highest rate in five years.
That means the value of real earnings have dropped 0.3 percent over the past year.
What’s more the Bank of England expects consumers could be with more price hikes and a rise in interest rates.
The Bank of England Governor, Mark Carney, told MPs from the Treasury Select Committee on Tuesday that inflation has not yet peaked.
“We expect that inflation will peak in around the October figure or October November figures, and so peaking potentially above the 3 percent level,” said Carney. “We still face a trade off between having inflation above target and the need to support, the desirability, and this goes to a secondary objective, of supporting jobs and activity.”
An interest rate rise would help boost Sterling but it could also reduce growth; not a prospect the UK needs as its economy is already showing signs of strain due to Brexit fears and uncertainty.