United Kingdom wage growth lags inflation even as jobless rate hits new low

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In recent months, the currency has also been supported by expectations of a Bank of England interest rate hike.

Tuesday's data comes just weeks ahead of the May interest rate decision from the Bank of England May that is widely expected to yield another 25 basis point increase in the Bank Rate, which would leave the UK's main interest rate at 0.75%.

At 4.30 am ET Tuesday, the Office for National Statistics is slated to issue United Kingdom unemployment data for three months to February.

Rate setters predicted at the time that inflation would remain above the 2% target until at least the first quarter of 2021 and that it would average around 2.9% for the first quarter of 2018. "A lot of the detail in the report suggests the labour market is still tightening", Philip Shaw, an economist with Investec, said. The latest snapshot of the United Kingdom jobs market was released on Tuesday, showing United Kingdom wage growth outstripping inflation for the first time in more than a year, but slightly below estimates.

The pound's value plummeted against both the dollar and the euro after Britain voted to leave the European Union, experiencing the biggest single-day drop of any major currency in history on the day after the vote. But Shaw said a pickup in growth in pay excluding bonuses to 2.8 percent from 2.6 percent in the three months to January - in line with the Reuters poll and the strongest reading since early 2015 - would give a green light to the BoE to raise rates. That's 55,000 more than for the previous period. "The unemployment rate fell, too, and is at its lowest since 1975".

"The pound was the standout performer yesterday and is now the best performing G10 currency versus the United States dollar on a year-to-date basis".

The latest wage growth figure of 2.8% means that over the three-month period, pay increased at a faster pace than the ONS's preferred CPIH measure of inflation, which includes housing costs.

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