Wage growth in the UK has slowed by the most in nearly two years, but it is hard to expect Bank of England to act this week

Wage growth in Britain slowed by the most in nearly two years, official data showed on Tuesday, but it may still be growing too fast for the Bank of England to relax its hardline stance on interest rate cuts.

Average weekly earnings (excluding bonuses) rose 7.3% year-on-year in the three months to October, down from a 7.8% increase in the three months to September.

The decline was the largest since the three months to November 2021, the Office for National Statistics said, while analysts polled by Reuters had forecast a 7.4 per cent increase.

Darren Morgan, director of economic statistics at ONS, said: "While annual wage growth remains high in cash terms, there are some signs that wage pressures may be easing overall."

The British economy is stagnant, and some analysts say the country could slip into a shallow recession in the coming months, similar to the risks facing other European countries.

But with the UK workforce shrinking sharply during the epidemic, coupled with post-Brexit restrictions on workers from the European Union, many employers are struggling to fill vacancies.

"From the MPC's perspective, it's clear that the wage data is now moving in the right direction," said Martin Beck, chief economic adviser at the EY ITEM Club.

"But with annual wage growth still more than double the Bank of England's 2 per cent inflation target, the MPC is likely to maintain the'keep rates high for longer 'signal for some time."

After the data was released, the pound weakened against the dollar and British government bond yields fell sharply.

The Bank of England is expected to keep interest rates unchanged this week

The Bank of England, which raised interest rates 14 times in a row between December 2021 and August 2023, has held its ground since then and is expected to continue to say at its meeting on Thursday that it is not considering a rate cut.

Conventional wage growth slowed, falling further from a summer peak of 7.9 percent, the highest since the Office for National Statistics began collecting the data in 2001.

Including bonuses, which are usually volatile, average weekly earnings growth slowed to 7.2% in the three months to October from a year earlier and 8.0% in the three months to September.

The Bank of England is concerned that wage growth, particularly in the private sector, remains too strong to bring inflation down to its 2% target even as the broader economy stagnates.

The increase in private sector income excluding bonuses fell to 7.3% in the three months to October, compared with 7.9% in July-September.

Job openings fell for the 17th consecutive time in the three months to November, down nearly 30 per cent from their peak but still above pre-epidemic levels.

Tuesday's data also showed that the UK's unemployment rate remained at 4.2 per cent in the three months to September, with 50,000 jobs added.

The ONS has said the figures may not be reliable, having had to change the way it measures the labour market through monthly labour force surveys because of a drop in the number of responses it receives.

Despite the slowdown in overall wage growth, workers' incomes rose by the most since the three months to September 2021, at an annual rate of 1.2 percent, when adjusted for consumer price inflation.