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Free AccessNewsflow following Bailey's comments focuses on higher wages
- The news coverage this morning is all skewing in favour of higher Bank of England rates.
- We have covered Governor Bailey's comments earlier in detail, but wages are also making headlines in the UK today.
- The Political Editor of the Daily Mail, Jason Groves, tweeted a couple of hours ago that the Royal College of Nursing will ballot members next month over industrial action in relation to pay. The RCN is still said to be seeking a 12.5% pay rise, while the government is offering 3%. Nurses on strike as the NHS has record waiting lists and approaches the winter flu season (and with the severity of the seasonal impact on Covid-19 still not quite known) would be a PR disaster for the government. Particularly after Boris Johnson's recent higher wage, higher productivity comments.
- Second, the BBC is reporting that Amazon is offering sign on bonuses of up to £3,000 in order to recruit staff ahead of the holiday season in some locations (up from £1,000 bonuses in August).
- Underlying wages are already picking up with last week's labour market report noting that the ONS has revised up its estimate of underlying regular earnings growth from 3.6-5.1% to 4.1-5.6%.
- These headlines about potential wage rises and bonus payments will be of particular interest to the Bank of England who, as Governor Bailey pointed out, are very focused on medium-term inflation expectations at present. If wages pick up, then so will inflation expectations.
- These moves have seen a further sell-off in the front end of short sterling and an inversion of the curve is even more apparent looking at the chart now. Either the market will reprice the Greens/Blues over coming days, or it is pricing in a policy mistake. Or, more likely in our view, the Whites/Reds moves are overdone and will show some retracement in the coming sessions.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.