Bank of England expected to leave interest rates on hold today, as wage growth slows – business live | Business

March 20, 2025

ONS director of economic statistics Liz McKeown has summed up today’s UK labour market report:

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“Overall pay growth remains relatively strong, with pay growth high in both the public and private sectors, despite the latter slowing slightly in the latest period.

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“The wider labour market picture is relatively unchanged, with the number of employees on payroll broadly flat in the latest period and with little growth seen over much of the last year.

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“Unemployment, as measured by the Labour Force Survey, and the Claimant Count have both increased slightly in the latest periods, though caution continues to be advised with the survey estimates.

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“Initial estimates show that the number of vacancies is little changed on the previous quarter, remaining just above pre-pandemic levels.”

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Ahead of the Bank of England interest rate announcement, we have a new healthcheck on Britain’s jobs market.

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And it shows that wage growth has slowed slightly, while unemployment is a litte higher than a year ago.

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The Office for National Statistics reports that total pay, including bonuses, rose by 5.8% per year in the three months to January, down from 6.1% a month ago.

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Regular pay growth, which strips out bonuses, was unchanged at 5.9%.

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The BoE may be relieved to see slowing pay growth, as that lessens the risk of a wage-price spiral breaking out. On the other hand, pay is still rising almost three times as fast as its inflation target.

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The report also shows that the unemployment rate remained at 4.4%, with the number of people out of work and looking for a job up by 40,000 in the quarter to 1.545m

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Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

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Bank of England policymakers face a tricky situation this week when they met to set interest rates.

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On the one hand, the economic picture is darkening – with UK GDP shrinking in January, the steel industry hit by US tariffs, and fears of a global trade war gripping the world economy. That’s could make the Bank consider lowering borrowing costs.

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On the other hand, prices are rising faster than its target – with inflation running at 3% in January. That’s a compelling reason not to cut the cost of borrowing.

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Faced with this situation, the City expects the Bank to leave policy unchanged at noon today.

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The money markets indicate there’s just a 4% chance of a rate cut today, to 4.25%, and a 96% likelihood that Bank Rate is unchanged at 4.5% today.

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Matthew Ryan, head of market strategy at global financial services firm Ebury, explains:

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“On the one hand, the UK economy continues to trundle along at nothing more than a snail’s pace, hamstrung by acute trade uncertainties and fragile business confidence ahead of impending tax hikes.

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“Yet, with most of the MPC appearing concerned about nagging upside risks to inflation, particularly stemming from sticky wage growth, we think that the hawks will get their way, with the communications to hint at only a gradual pace of cuts ahead.

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The BoE last cut rates in February, when we were surprised that the previously hawkish. BoE policymaker Catherine Mann voted for a jumb reduction in rates.

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There could be a similar split today, Ryan suggest:

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The vote on rates appears highly unlikely to be unanimous, and we expect the two members that opted for a jumbo rate reduction last time out, Dhingra and Mann, to favour a 25bp cut on Thursday.

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The decision comes at noon – before that, the Swiss and Norwegian central banks will make their interest rate announcements too, on a busy week for central bankers.

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Last night, officials at the US Federal Reserve cut their US economic growth forecasts and raised projections for price growth as they kept interest rates on hold.

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“Uncertainty around the economic outlook has increased,” the central bank said in a statement, as Donald Trump’s attempt to overhaul the global economy with sweeping tariffs sparks concern over inflation and growth.

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The agenda

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7am GMT: ONS releases latest UK labour market report

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8.30am GMT: Swiss National Bank sets interest rates

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8.30am GMT: Norway’s Riksbank sets interest rates

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10am GMT: Eurozone construction output report for January

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Noon: Bank of England rates decision

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12.30pm: US weekly initial jobless claims data

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12.30pm: Philly Fed business conditions index

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2pm US existing home sales for February

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Important Events

ONS: Wage growth remains relatively strong

on Director of Economic Statistics Bureau Liz McKeun A summary of today's UK labor market report:

“Overall wage growth is relatively strong, and despite the latter slightly slower in the latest period, wage growth has been high in both the public and private sectors.

“The wider labor market photo remains relatively unchanged, with the number of salary employees being roughly flat in the most recent period and barely growing for most of last year.

“While both unemployment and claims measured in the workforce survey have increased slightly in the most recent period, we are paying attention to the survey estimates.

“An early estimates show that the number of vacancy had little change in the last quarter, remaining just above pre-pandemic levels.”

Adjusting for inflation, actual regular wages rose 3.2% last year, while actual total wages (via bonuses) rose 3.1%.

ONS has been high over the past three months, where both the actual regular and total annual growth rates were 3.4% and 3.5%, respectively.

UK wage growth is slowing down a bit

Ahead of the Bank of England's interest rate announcement, there will be a new health check on the UK job market.

And that shows that wage growth has slowed slightly, but the unemployment rate is higher than a year ago.

The National Bureau of Statistics reports that total salary, including bonuses, increased by 5.8% per year in the three months leading up to January, down from 6.1% a month ago.

The growth of regular pay increases that removes bonuses was unchanged at 5.9%.

BOE may be relieved to see wage growth slower as it reduces the risk of a wage price spiral breaking out. Meanwhile, pay is still rising almost three times faster than inflation targets.

The report also shows that the unemployment rate remains at 4.4%, with the number of people still working, with 1.545m of those looking for 40,000 jobs per quarter.

Introduction: The Bank of England is expected to hold interest rates

Good morning and welcome to our comprehensive coverage of our business, financial markets and the global economy.

Bank of England policymakers are facing difficult situations this week when they met to set interest rates.

On the one hand, the economic situation is getting dark. UK GDP shrinks in January, and US tariffs hit, and there is a fear of a global trade war that captures the world economy. This could lead banks to consider lowering their borrowing costs.

Meanwhile, prices are rising faster than target, operating at 3% inflation in January. That's a compelling reason not to cut the costs of borrowing.

Facing this situation, the city hopes that the banks will not change their policies at noon today.

The money market shows that today there is a 4% chance that the rate will be reduced to 4.25%, while the bank rate is 96% chance that it has not changed to 4.5% today.

Matthew Ryan, Market Strategy Manager for Global Financial Services Company Every,explanation:

“On the other hand, the UK economy continues to shake anything but the snail pace, struck by the uncertainty of acute trade and the trust of vulnerable businesses ahead of the urgent taxation.

“But I think the Hawks will give way if they gradually suggest a pace of cuts, as most of the MPCs are concerned that they are plaguing the reverse risk of inflation, especially due to sticky wage growth.

BOE reduced its final reduction rate in February. BOE policymaker Katherine Mann voted to cut the fee jam.

There may be a similar division today, Ryan suggest:

The vote on the fee appears to be unanimous, and Dingra and Mann, two members who last chose to cut the jumbo rate, expect to support the 25bp cut on Thursday.

This decision will be made at noon. Before that, central banks in Switzerland and Norway will also announce interest rates during the central bank's busy week.

Last night, US Federal Reserve officials raised price growth forecasts as they reduced their forecasts for US economic growth and put interest rates on hold.

“Uncertainty regarding the economic outlook is increasing,” the central bank said in a statement. Donald Trump's Trying to overhaul the global economy with wiped tariffs raises concerns about inflation and growth.