UK Edition
Bank of England policymaker says she believes wages will pick up
Research points to an imminent pay rise for UK workers, according to a leading Bank of England policymaker.
Silvana Tenreyro, who voted in favour of a interest rate hike on November 2, the UK's first in a decade, said she believed that data suggested a rise in earnings was on the way.
This comes as reports from both the Office for Budget Responsibility and the Institute for Fiscal Studies have suggested that low productivity will not only hamper overall growth in the UK economy until 2021-22, but also hit household incomes, with stagnant levels of wage growth.
In response to Wednesday's OBR report, the IFS labelled the fact that wages are unlikely to return to 2008 levels by 2022 as “truly astonishing”.
Ms Tenreyo disagrees. Speaking to Bloomberg, one of the newest members of the UK central bank's Monetary Policy Committee, said that surveys and reports had led her to be more confident that the lowest unemployment levels seen in the UK since 1975 would start to result in stronger wage growth.
Her views follow the Bank of England's November Inflation Report.
"Wage growth is projected to increase gradually over 2018, as the tightening labour market starts to put more widespread upward pressure on wage demands and as productivity growth recovers somewhat," the report stated.
This is very much at at odds with the view of the OBR. On Wednesday its report said that output per hour worked will not recover quickly and that would not only damage the outlook for UK GDP, but also hold back rises in pay.
Ms Tenreyro is joined in her verdict on wage growth by other members of the MPC. On Tuesday, Gertjan Vlieghe told members of the Treasury Select Committee that "there is some evidence the process of labour market tightness leading to upward wage pressure has now begun".
Ms Tenreyro said that she believed two further rates hikes would required to keep inflation in check - near the 2pc Bank of England target - and rebuffed suggestions that the timing was wrong for the 0.25 basis points rise.
“I didn’t think this was premature and in fact I did wait until I saw the signs from the surveys that convinced me,” she said.