Wage strength dampens chances of UK rate cut

Markets have sharply reduced expectations of a Bank of England rate cut after data showed UK wage growth beat expectations in the three months to October.

Swaps showed the implied probability of a third of a percentage point rate cut in 2025 had fallen to below 50%, down from 90% before the data was released. Sterling also pared some of its losses, rising 0.2% to 1.2707 against the dollar, while UK government bond yields fell broadly.

On the other hand, average earnings growth, excluding bonuses, rose 5.2% compared to the same period a year earlier, while the revised growth rate was 4.9% in the three months to September. Analysts had forecast growth of 5%, which would be the first increase since August 2023.