Wage growth remains stubbornly high – what does it mean for interest rates?

Today’s wage growth figures came in higher than expected, but there are signs that the labour market is cooling. What does it mean for inflation and interest rates?

Female engineer in a drinking water factory in professional uniform.
(Image credit: TravelCouples via Getty Images)

Regular wages (excluding bonuses) grew by 6% in the first quarter of 2024, according to the Office for National Statistics (ONS). That’s compared to the same period a year before. This reading was higher than expected, and marks no slowdown compared to last month’s report. Economists polled by Reuters were expecting the figure to come in at 5.9%. 

The Bank of England keeps a close eye on wage growth data when setting interest rates, as wages are a big driver of inflation. The Bank has been holding the base rate at 5.25% since August 2023 in an attempt to quell rising prices, but households and businesses across the country are hoping for a rate cut this summer. 

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Katie Williams
Staff Writer

Katie has a background in investment writing and is interested in everything to do with personal finance, politics, and investing. She enjoys translating complex topics into easy-to-understand stories to help people make the most of their money.

Katie believes investing shouldn’t be complicated, and that demystifying it can help normal people improve their lives.

Before joining the MoneyWeek team, Katie worked as an investment writer at Invesco, a global asset management firm. She joined the company as a graduate in 2019. While there, she wrote about the global economy, bond markets, alternative investments and UK equities.

Katie loves writing and studied English at the University of Cambridge. Outside of work, she enjoys going to the theatre, reading novels, travelling and trying new restaurants with friends.