New salaries offered by British employers rose in the quarter to May, stoking fears that one of the top drivers of inflation may be taking a while to ease.
Median basic pay settlements in the three months to May lifted 4.6% year-on-year compared to the 4.5% jump recorded in April, data provider Brightmine found.
Pay growth is an important area of focus for the Bank of England as it mulls when to start lowering interest rates ahead of Thursday’s meeting.
Most policymakers on the Monetary Policy Committee are looking for signs that wage growth is rising by around 3% to 4%, down from recent averages of 6%, before they vote to cut rates.
"As we head further into the year, we can see that settlement levels are sitting firmly below 5%, a level we now expect them to sit at through to the end of the year," Sheila Attwood at Brightmine said.
"Employers have reacted to lower inflation by bringing down the level of settlements compared with last year, but are keeping pay rises comfortably above inflation while employees continue to feel cost of living pressures."
This morning, May’s inflation figures revealed price growth eased back to the Bank of England's target level of 2.0% for the first time in almost three years.
However, the fall in CPI inflation "probably won’t be enough" to persuade the Bank of England's MPC to cut interest rates tomorrow, says Ruth Gregory at Capital Economics.
“For now, we are sticking with our forecast that the Bank will first cut interest rates from 5.25% in August, although that relies on better news on services CPI inflation and wage growth in the coming months,” she added.