Wages wont keep up uk central bank says inflation biting

According to a recent report by the Bank of England, wages in the UK are unlikely to keep pace with inflation, which is expected to remain above target for the foreseeable future. The central bank's Monetary Policy Committee (MPC) has warned that the cost of living is biting, and households are facing a squeeze on their purchasing power.

The report highlights that wages have been growing at a slower rate than inflation, which means that the value of people's earnings is being eroded. The MPC has forecast that inflation will remain above the Bank's 2% target until at least 2024, driven by factors such as higher energy prices, supply chain disruptions, and the impact of the COVID-19 pandemic on global trade.

The Bank's Governor, Andrew Bailey, has warned that the situation is likely to worsen, with inflation expected to peak at around 4% in the coming months. He has urged households to be cautious and to review their budgets to ensure they are prepared for the rising cost of living.

The report also highlights that the UK's economic recovery from the pandemic is being hindered by the shortage of skilled workers, which is driving up wages and prices. The Bank has warned that this could lead to a wage-price spiral, where higher wages drive up prices, which in turn drive up wages, and so on.

The MPC has decided to keep interest rates on hold for now, but has left the door open to raising rates in the future if inflation continues to rise. The Bank has also warned that the UK's economic recovery is still fragile and that the country is vulnerable to external shocks.

Overall, the report suggests that the UK is facing a challenging economic environment, with households facing a squeeze on their purchasing power and the Bank warning of the risks of higher inflation and interest rates.