“Today’s data is unlikely to warrant a cut in interest rates this afternoon by the Bank of England. Priorities have shifted, with MPC members set to turn their attention to the new upside risks to the inflation outlook. This could see interest rates staying higher for longer, raising the prospect of a more pronounced loosening in the labour market over the coming months.
“Wage growth fell to 3.8% in January, driven by a continued easing in public‑sector pay settlements. Despite the rise in energy costs, pay pressures will likely ease further in the months ahead. Demand for labour is weak, which should curtail workers’ bargaining power and limit the scope for a pick-up in wage growth. We expect headline pay growth to fall to around 3% by the end of the year.
"The unemployment rate was unchanged at 5.2% in the three months to January but could potentially rise further over the coming months. Downside risks for the labour market have become more pronounced with the combination of a sluggish domestic economy and higher energy prices increasing costs for businesses. Firms may look to pass on some of this cost to consumers and it could also slow hiring activity further in the near term.”
