This content is not available in your region

Will UK interest rates rise as inflation outstrips wage growth?

Access to the comments Comments
By Euronews
Bank of England in London
Bank of England in London   -   Copyright  Euronews

Consumer price inflation in Britain is now three percent which is close to its highest level for six years.

After Britons voted to leave the EU in 2016 the pound tanked and inflation rose as the cost of imports went up.

The last interest rate rise was in November and that was the first in more than a decade. Last week the Bank of England kept the rate at 0.5 percent.

But wage growth is lagging behind and that's a worry analysts say.

"The inflation is a major concern because the wage growth isn't there. We need to see the same sort of resilience in the UK wage growth that we have seen over in the US and by no parameters can we say that the UK wage growth is exactly in the same equation US wage growth. But we do need to see the wage growth moving in the right direction," Naeem Aslam, chief markets analyst at Think Markert said.

In the three months to November 2017 workers' earnings, rose by 2.4 percent indicating they're not keeping up with inflation.

But job creation has remained strong and now there's talk of interest rate rises.

"There is so much noise by the policymakers in the market that, ok, perhaps the UK is ready for another interest rate hike -by no means is the UK economy ready for another interest rate hike," Aleem said.

But last week the Bank of England said it's likely to raise interest rates sooner and by more than it thought only three months ago because Britain’s slow-moving economy is getting a boost from the global recovery.