LONDON (Reuters) – Evidence for a “new dawn” in British wage growth after years of sluggish pay rises has strengthened over the past year, though the pace of the pick-up is likely to be limited, the Bank of England’s chief economist Andy Haldane said on Wednesday.
Haldane linked the modest forecast pick-up in pay with financial market expectations for the central bank to raise interest rates by about a quarter of a percentage point a year over the next three years.
“I think there is more compelling evidence of a new dawn breaking for pay growth, albeit with the light filtering through only slowly,” he said in a speech to Britain’s ACAS labour dispute arbitration service.
“A limited and gradual build in domestic cost pressures is one important factor underpinning the limited and gradual pace of further interest rates rises expected by financial markets and communicated by the Monetary Policy Committee,” he added.
The BoE increased interest rates for only the second time since the financial crisis in August, raising them to 0.75 percent from 0.5 percent.
However, Haldane said that in the longer term there risked being downward pressure on pay growth from reduced worker bargaining power, automation and less competition between businesses.
(Reporting by David Milliken; editing by Sarah Young)