(Bloomberg) -- Pay pressures in the U.K. have gone up a gear this year, boosting the chances of faster underlying inflation, according to Bank of England Chief Economist Andy Haldane.
Haldane, who shocked markets last month by voting for an immediate interest rate hike, made the comments in a blog detailing a trip to Wales ending on June 26. Two days later, he made a speech in which he said that a steady pick-up in wage growth and cost pressures showed the U.K. economy is ready for higher rates.
“The message from a number of companies across a number of sectors in Wales was that these pressures to pay-up were mounting -- indeed, these pressures had gone up a gear during the course of this year,” Haldane wrote in the post published on the BOE’s website. “This evidence adds to my confidence that the economy is experiencing a gradual, on-going firming of pay pressures, with implications for underlying inflation.”
A report tomorrow is forecast to show that U.K. pay growth slowed to 2.7 percent in the three months through May, down from 2.8 percent in the period through April. Still, the rate has climbed from less than 2 percent in early 2017.
BOE officials announce their next policy decision on Aug. 2. A 25 basis point increase is widely expected by economists, while markets are pricing in a more than 80 percent chance of such a move.