The latest data suggest that the upward pressure on wage growth from labour shortages has a bit further to run. Admittedly, the discovery of the Omicron variant has clouded the near-term outlook for wages and the labour market, with higher virus infections and/or tighter restrictions once again a possibility. Nonetheless, our base case is that most of the upward pressure on wage growth will subside from mid-2022, underpinning our view that Bank Rate won’t need to rise as far as investors currently expect.
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