UK Wage Growth Hits 7.3% Annual Rate, Raising Concerns of Unsustainable Inflation

The Office for National Statistics (ONS) reported that average weekly earnings, excluding bonuses, hit an annual growth rate of 7.3% during the three months to May, which matched the highest level on record.

The wage figure was the most eagerly anticipated piece of data in the ONS report, which also showed vacancies falling to a 2021 low and a climb in the unemployment rate to 4% from 3.8%.

Governor Andrew Bailey hinted that further rate pain lay ahead despite forecasting that energy-led inflation would fall "markedly" in the months ahead.

The bank imposed a shock 0.5 percentage point rate rise last month, taking Bank Rate to 5%, in reaction to the wage spike and wider evidence that higher prices were becoming engrained in the economy.

The fact that salary increases have failed to decline will be a worry for policymakers.

The bank has an inflation target of 2%.

The article mentions that the MPC (Monetary Policy Committee) is concerned about the rate of increase in wages.

The writer suggests that the current level of wage growth is too high and cannot be sustained indefinitely.

The MPC may take action to control wage growth in order to maintain economic stability.