Interpretation of UK LMO Report: Wage Growth Reaches Historic High, Possibility of Central Bank Raising Interest Rates by 50 Basis Points Increases

　　Wage growth in the United Kingdom (GBR) beat expectations and reached an all-time high, meaning that the Bank of England (BoE) will not only continue to raise interest rates, but the likelihood of following through on last month's radical 50 basis point increase has increased.

　　According to the Labour market Overview (LMO) published by the Office for National Statistics (ONS), average pay excluding bonuses rose 7.3 per cent in the three months to June compared with the same period a year ago, matching the record level reached in mid-2021, when the data was clearly affected by Covid-19.

　　Yael Selfin, chief economist at KPMG, said: "Today's data confirm that the Labour market remains overheated as wage growth remains uncomfortably high."  

　　Jamie Rush, chief European economist at Bloomberg Economics, said: "The Labour market is turning. We just need confirmation in some of the inflation data so the central bank can rule out a 50 basis point rate hike. The wage data increases the likelihood of another 50 basis point rate hike in August, but ultimately it will be the inflation data that will be released next week that will have a decisive impact on the rate decision."

　　Craig Inches, head of rates and cash at Royal London Asset Management, said: "It is too early to judge the extent of the rate hike, but the Bank of England will see it as a positive. The Monetary Policy Committee may well need to raise interest rates more, but the market reaction to the data suggests some doubt about that. Is the market overpriced - 6.5 per cent terminal rate?"

　　Stuart Cole, chief macroeconomist at Equiti Capital, said: "Today's data do nothing to convince the Bank of England that the Labour market has slowed and instead only conclude that monetary policy needs to tighten further. It is hard not to conclude that much more needs to be done if inflation is to be brought under control."