MNI BRIEF: BOE Rate Cut Closer But Still Some Way Off - Pill

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Early BOE cuts look less likely after strong wage data

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  • Looking in more detail at the private regular AWE numbers: there were small upward revisions to the single month numbers for both December and January (December not enough to change the 6.0%Y/Y single month estimate and January to increase it by 0.1ppt from 5.8%Y/Y to 5.9%Y/Y).
  • We had noted before the data that to be consistent with the consensus expectation of a 5.8%Y/Y print in the 3-months to February, we would need to see 5.4%Y/Y or 5.5%Y/Y in the single month estimate for February. That came in at 5.9%Y/Y - so is 0.4-0.5ppt above where consensus expectations had put it.
  • If we compare to the last time this cohort was surveyed (each cohort is surveyed every 3 months), there is a 0.4ppt fall in the Y/Y growth rate - in the January cohort it was a 0.3ppt fall (revised down from a 0.4ppt fall).
  • Looking at momentum this is the highest 3m/3m annualised reading since September at 4.4% (up from +3.4% in January which was revised from +3.3%).
  • How much can we read into this? Wages still appear more sticky than consensus expects - which is something we had argued in our Labour Market Insight last month and in our Labour Market Preview. The BOE's February MPR forecast of 5.7%Y/Y in the 3-months to March looks like we will need to see a slowdown in next month's wage numbers to not come in 0.1-0.2ppt above. However, the big caveat to all of this is how much of this number can be explained by early wage rises relative to the NLW rise that came into effect in April.
  • Either way, we see this as pushing back on the idea of early BOE cuts - but still see June and particularly August very much in play for the first cut (May looks even less likely than the 15% probability we had assigned it before this print).
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  • Looking in more detail at the private regular AWE numbers: there were small upward revisions to the single month numbers for both December and January (December not enough to change the 6.0%Y/Y single month estimate and January to increase it by 0.1ppt from 5.8%Y/Y to 5.9%Y/Y).
  • We had noted before the data that to be consistent with the consensus expectation of a 5.8%Y/Y print in the 3-months to February, we would need to see 5.4%Y/Y or 5.5%Y/Y in the single month estimate for February. That came in at 5.9%Y/Y - so is 0.4-0.5ppt above where consensus expectations had put it.
  • If we compare to the last time this cohort was surveyed (each cohort is surveyed every 3 months), there is a 0.4ppt fall in the Y/Y growth rate - in the January cohort it was a 0.3ppt fall (revised down from a 0.4ppt fall).
  • Looking at momentum this is the highest 3m/3m annualised reading since September at 4.4% (up from +3.4% in January which was revised from +3.3%).
  • How much can we read into this? Wages still appear more sticky than consensus expects - which is something we had argued in our Labour Market Insight last month and in our Labour Market Preview. The BOE's February MPR forecast of 5.7%Y/Y in the 3-months to March looks like we will need to see a slowdown in next month's wage numbers to not come in 0.1-0.2ppt above. However, the big caveat to all of this is how much of this number can be explained by early wage rises relative to the NLW rise that came into effect in April.
  • Either way, we see this as pushing back on the idea of early BOE cuts - but still see June and particularly August very much in play for the first cut (May looks even less likely than the 15% probability we had assigned it before this print).