British workers are this year in line for their biggest pay rises since 2008 as a higher minimum wage kicks in, according to a Bank of England (BoE) survey that is likely to fuel concern about inflation among its policy makers.
The data come on the heels of recent warnings from the Bank of England that interest rates may have to be hiked more aggressively than previously thought in order to control inflation, putting a May hike in play.
Writing in today's The Yorkshire Post Will Holman said the economy "is finally returning to normal" following the financial crisis and, that while further rises are likely, they will remain at a level lower than those seen a decade ago.
But with unemployment at its lowest since 1975 and European Union immigrants less keen to come to Britain ahead of its departure from the bloc, the BoE thinks pay is beginning to pick up.
According to the February update, private sector business leaders are expecting an average pay settlement rate of 3.1 per cent in 2018, compared with 2.6 per cent a year ago.
UK inflation remains at 3% in January 2018
The Central Bank report also shows that businesses feel pressure from higher mandatory pension contributions, increased inflation, the lack of foreign workers, and difficulties in recruiting and retaining staff.
The rate had hit 3.1 per cent in November, which was the highest level in nearly six years.
Most economists expect the Bank of England to raise interest rates by a quarter percentage point in May to 0.75%. Even as this effect fades, the BoE expects inflation to fall only slowly as domestic pressures build.
The yield on the benchmark 10-year gilts, jumped 4-1/2 basis points to 1.61 percent, the super-long 30-year bond yields surged 4 basis points to 1.98 percent and the yield on the short-term 2-year too traded 3-1/2 basis points higher at 0.69 percent by 09:45GMT. Combined with data on the manufacturing and construction sector that were worse than expected last week, results on activity in the service sector show that the sixth largest economy in the world is growing at the slowest pace since the Brexit vote.
The BoE has been overly optimistic about pay before. The survey was based on replies from 368 businesses employing 845,000 staff.
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