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Pay is outstripping inflation, whilst interest rates are not expected to change

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Pay deals are running ahead of the inflation rate, with recent settlements worth between 2.5% and 4%, according to the Times newspaper.

A survey of 250 wage agreements showed that pay rises in the second quarter of the year were higher than the same period a year ago. Deals agreed in recent weeks have continued to keep ahead of headline inflation, which is currently 1.9%.

Meanwhile, most press reports on the subject would indicate that this coming Thursday’s meeting of the Monetary Policy Committee will recommend that interest rates will remain unchanged. It is reportedly worried that a rate reduction from 5.25% will risk stoking a two-speed economy that has seen consumer spending race ahead despite industry woes.

Neil Parker, economist at the Royal Bank of Scotland, said: “I can’t see how they can justify a rate cut in the current environment. I would say the chances of a cut are very low.”

Figures released on Friday indicate that the economy grew by just 0.3% in the second quarter of this year – the lowest figure since 1998.

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