The unemployment rate in the UK rose to 4% in the three months leading up to May, according to data from the Office for National Statistics. This increase, above economists’ forecasts, puts pressure on the Bank of England to further raise interest rates in an effort to combat inflation.
On the positive side, wage growth maintained its rapid pace during this period. The ONS revised upward the average weekly earnings, excluding bonuses, to 7.3% in the three months leading up to April. Wage growth remained strong in May as well, matching economists’ expectations and equaling the fastest wage growth on record.
Economist Ashley Webb at Capital Economics noted that higher average wages mean the Bank of England has more work to do. He predicts that the central bank will increase interest rates again in August, following a half-point increase in June, and possibly raise them again in the future.
The Bank of England is facing the challenge of bringing down inflation, which reached its highest level in decades in May, according to the ONS.