Good News for Workers
Millions of workers across the UK are experiencing a rise in wages as inflation begins to ease, according to official figures released by the Office for National Statistics (ONS). In the three months to September, regular pay (excluding bonuses) stood at 7.7%, resulting in a 1.3% increase when accounting for inflation. This comes after wages outpaced inflation for the first time in two years.
Relief for Hard-Pressed Households
The growth in wages is particularly good news for workers who have been grappling with high inflation in recent months. In September, inflation remained at 6.7%, the same level as August. However, October figures are expected to show a drop to below 5% for the first time in two years. This means that wages are now rising faster than prices, providing some relief for hard-pressed households.
Impact on Your Finances
Alice Haine, personal finance analyst at Bestinvest, explains that rising real wages technically improve workers' standard of living as their earnings can stretch further. However, it's important to note that this rise is an average and doesn't necessarily mean that the cost of living challenges are easing for everyone. Additionally, while high wage growth can ease pressure on households, it also runs the risk of fueling inflation if businesses pass on the increased cost to customers through higher prices for goods and services.
Bank of England's Perspective
Rising wages have previously been blamed for keeping inflation high by Bank of England officials. The Bank's Monetary Policy Committee recently decided to maintain the base rate at 0.25 percentage points to 5.25%, which eases pressure on homeowners facing rising mortgage rates. High-street banks use the base rate to determine the interest rates they offer to customers. An increase in the base rate would make borrowing, including loans, credit cards, and mortgage repayments, more expensive.
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