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Pay data puts UK rate hike back on radar

Wednesday, June 17, 2015 - 01:53

British workers' pay grew at its fastest rate in nearly four years in the three months to April, putting the prospect of the Bank of England finally raising interest rates firmly back on the agenda for investors. As David Pollard reports, it wasn't the only piece of positive data from Europe.

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Making bikes is just one thing the UK is good at. But it seems the whole economy is picking up speed. Wage rises have reached their highest rate for nearly four years, new figures show. Total pay climbed by 2.7% compared with a year earlier in the three months to April. Ultra-low inflation - on the year, prices fell 0.1% in April - means the surge in pay is worth more in real terms. UK employment minister, Priti Patel. SOUNDBITE (English) UK EMPLOYMENT MINISTER, PRITI PATEL, SAYING: ''Employment is at a high, we're seeing more women in work than ever before, we're seeing wages going up, and we're seeing investment in the United Kingdom as well - we've also seen figures today that foreign direct investment is at a record high.'' The figures show Britain's unemployment rate stable at 5.5 percent in the three months to April, holding at its lowest level since 2008. Good news for the economy - and for UK's new government. Though investors say energy prices are the ones to thank for bringing down inflation. And higher wage growth could remove one obstacle to the Bank of England raising rates. The UK central bank is likely to wait to see what its bigger US cousin does first, says JP Morgan strategist Kerry Craig. (SOUNDBITE) (English) KERRY CRAIG, GLOBAL MARKET STRATEGIST, JP MORGAN ASSET MANAGEMENT, SAYING: ''They'll be looking at how the markets reacts to the Fed, thinking in their own mind that we may be moving in the Bank of England policy sphere about six or nine months from now themselves. They'll be very much looking at the reaction from anyone else when the Fed does make that move higher in the rate cycle.'' Positive numbers from the euro zone too: inflation confirmed as back in positive territory again in May - with a 0.2 per cent rise on the month. And Germany's influential IFO institute revised up its growth outlook for Europe's biggest economy - to 1.9 per cent this year, from 1.5 previously. But for Europe as for Britain, one possible spanner in the works remains, say economists: Greece.

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Pay data puts UK rate hike back on radar

Wednesday, June 17, 2015 - 01:53