We don’t think the slew of inflation-busting public sector pay deals that have been agreed by the new government will prevent wage growth from slowing next year to the rates of 3.0-3.5% we think are consistent with the 2.0% inflation target. But the big risk is that these pay deals set a benchmark for private sector firms, keeping wage and services inflation elevated and causing the Bank of England to cut interest rates slower and/or by less than we currently anticipate.
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