Bank of England could wait longer to lower interest rates after UK wage boost, experts warn
manchestereveningnews.co.ukEconomists are warning that an increase to the UK's minimum wage could make it harder to keep inflation low, which could mean it takes longer for interest rates to come down.
The national living wage is going up by almost 10 per cent from today (April 1). The lowest paid workers in the UK will see their wage go up by 9.8 per cent to £11.44 an hour.
Some experts think this hike in wages could stop inflation from dropping as fast as expected. CPI inflation peaked at 11.1 per cent before a slump over the past year, with higher interest rates helping to bring it back down to 3.4 per cent. Read more: Exact dates Universal Credit, PIP, Child Benefit and more will rise as DWP and HMRC to increase benefits this month Ashley Webb, UK economist at consultancy Capital Economics said: "The fear is that the rise this year will contribute to stickier wage growth and inflation.” However, some have downplayed the impact, with only around 4.9 per cent of the UK workforce due to impacted by the increase.
Experts at Morgan Stanley said: "While there are some nuances around existing premiums to the currently mandated national living wage in low-paid sectors, and whether these compress in a looser labour market, last year’s pay beats in spring came on the back of IT, finance and professional services sector pay – not any outsized surprises on low-paid sectors.” Nevertheless, the impending rise will raise questions for Bank of England’s Monetary Policy Committee (MPC) as it assesses the inflation outlook and considers reducing interest rates from 5.25 per cent, where it has stayed for several months.
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