MPC member warns interest rates will only be cut when there is evidence that wage growth is slowing

Bank of England’s Rate‑Cut Roadmap: Wage Growth Still on the Menu

Ben Broadbent, a seasoned MPC member, has spoken plainly: the BoE won’t slice rates unless wages start slowing down. That’s the key takeaway for anyone keeping an eye on the UK’s economic pulse.

“We’re still a bit at sea, eh?”

During a talk at the London Business School, Broadbent highlighted that the uncertainty around the economy is still high. “It’s like watching a weather forecast from a decade ago—nothing but fog and surprise at the wind.” He pointed out that average wages are still climbing, tightening the grip on inflation, which is the main yardstick for the MPC’s nine members.

Why Lagging Wages Mean Inflation Pressures Stay Tight

Rising wages = higher household spending
More spending pushes price levels upward
Inflation hovering near targets keeps the BoE on its toes

Broadbent echoed a cautious stance: “With the volatility in official figures and the mess of differing indicators, we’ll need a clearer, sustained dip in wage growth before the MPC feels confident enough to cut rates.” In other words, a smoother slide in wages is the recipe, not a quick dip.

“The summer buzz was mercilessly inflated”

He added that many firms had already been soaking up big wage hikes earlier in the year. “Those increases were meant to cushion workers from the summer surge in living costs,” Broadbent explained. “Now, we’re watching how quickly that cushion starts to thin.”

Bottom line – unless wages stop the current upward sprint, the BoE keeps its rate‑cut fingers poised only to twitch when things truly reverse course.

Bank of England Keeps the Rate Tight as Wage Sparks Fuss

Andrew Bailey, the Bank’s governor, warned that businesses shouldn’t go moon‑walking with wages — raising pay past inflation will only feed the price machine. Yet Broadbent argues firms are doling out hefty raises to existing staff while shooing new hires on the sidelines, and that’s why 2023 saw a noticeable wage boom.

“The picture from the last few months is a bit muddled, and the data keeps doing its own thing,” Broadbent said. “So the MPC will probably want to see evidence from multiple angles before shouting ‘We’ve turned the corner.’”

Interest Rates Stay Put – No Cuts on the Horizon

Last week the Bank of England froze the base rate at 5.25%, and Bailey said cuts are still off the table.

Six MPC members voted to keep the rate at 5.25%.
Three were keen to bump it up to 5.5%.

Bailey reminded us that inflation has nosedived from >10% in January to 4.6% in October thanks to successive hikes. “We’ve come a long way, but there’s still a stretch to cover,” he added. The bank’s plan? Stay restrictive for an extended period and keep a sharp eye on the data, ready to tweak the rate until inflation slides back to the 2% target.