Wage surge dashes hopes for interest rate cuts as inflation fears grow

HOPES that interest rates will soon start falling were dashed yesterday after an unexpectedly big increase in wages stoked inflation fears.

Official jobs figures showed that wages rose by 5.2 per cent in the three months to October.

The figure is up from 4.4 per cent in September and well above the 4.6 per cent expected.

The news spooked financial markets that this was a sign of inflation rising again, and experts at the Bank of England will be reluctant to lower interest rates.

Traders have now put a close-to-zero chance of rates being cut at the Bank’s meeting on Thursday and expect them to remain at 4.75 per cent.

As a result, mortgages will stay higher for longer as the high street banks price home loans off where the market expects the Bank rate to be in the future.

Analysts at investment bank Peel Hunt said that the wage rise will “virtually guarantee that the BoE will hold the Bank rate unchanged at 4.75 per cent at its December meeting on Thursday — in line with our and the market’s expectations”.

Money markets are now convinced there will be only two interest rate cuts of 0.25 per cent each next year, meaning rates could remain as high as 4.25 per cent.

This is despite wide criticism that the Office for National Statistics’ jobs figures are not reliable due to a low level of responses to its survey, which pays £50 per response.

The recent inaccuracy of the ONS figures has led to claims that the Bank is flying blind on the economy.

 Data out tomorrow is also predicted to show inflation rose from 2.3 per cent to 2.7 per cent in November.

Economists say that the Bank’s rate-setters will have to debate signs of inflation increasing with other evidence that the economy is stalling.

The ONS jobs data also showed that vacancies have tumbled by 31,000 to a three-year low of 818,000 in fresh signs of companies freezing hiring after the Budget.

The Peel Hunt analysts branded the Budget an “anti-employment measure” which will “directly and indirectly increase the costs of hiring”.

Figures earlier this week showed the fastest rate of job shedding in four years as employers made cutbacks and held off recruitment.

Ten-pin prices pinned

THE boss of Hollywood Bowl has committed to keeping its ten-pin bowling lane prices low to continue attracting families.

Chief executive Stephen Burns said the entertainment firm faced £1.2million of extra staffing costs from the Budget but was “better placed than most” to mitigate them.

While the costs were still “clearly painful and unexpected” he said he didn’t see a short-term need to put up prices because it did not have a huge workforce.

The firm says a bowling game for a family of four costs £26, which is cheaper than other leisure attractions.

Mr Burns said: “People are looking for value which is why we’ve been really careful and only raised prices by 0.9 per cent in the past year to offer the most competitive deal.”

Hollywood Bowl yesterday toasted record £230.4million revenues, 7 per cent up on the year before.

Openings in Canada have helped.

Despite this, its shares dropped by 10.49 per cent, or 35p, to 298.5p yesterday, valuing the firm at £513.6million.

How low will hol veg go?

THE annual battle to sell the cheapest Brussels sprouts for Christmas will kick off in supermarkets tomorrow.

Nearly ten years ago Tesco launched a “festive five” bag of veg for 49p. Since then stores have chased the prices even lower, despite food inflation.

Last week industry figures from Kantar predicted the cost of a Christmas dinner would be 6.5 per cent more than last year, with parsnips and carrots up 12 per cent.

But that was before Tesco, Aldi, Lidl, Sainsbury’s and Asda all vowed to cut veg staples to 15p from December 19.

Morrison, which is trying to revive its sales, revealed it would go even further and is slashing its bags of carrots, parsnips, sprouts and swede to 10p while a 2kg bag of potatoes is £1.15 until January 1.

The British Growers Association has criticised the heavy discounting tactic for giving a false impression about the cost of farming food.

Crypto’s hype risk

“FEAR of missing out” is a big driver in young investors’ decisions to put their money in hyped products like crypto.

Two-thirds of young investors spent less than 24 hours deciding on an investment, according to the Financial Conduct Authority.

The poll showed that £550 is the average amount spent on “hyped products”.

Dan Coatsworth, at AJ Bell, said: “Cryptos are high risk and not suitable for everyone.”

A £3billion drip feed

THAMES WATER yesterday took a step closer to avoiding nationalisation after the High Court approved the first part of a £3billion emergency loan.

But critics say the deal’s huge 9.75 per cent interest rate will add £250 to bills.

The financing is being put up by a group of creditors who own around £11.5billion of Thames’ £16billion debt.

It comes after the UK’s biggest water firm warned it would run out of cash by March.

A smaller group of creditors oppose the loan, putting forward another at a lower rate.

THE number of firms going bust last month hit 1,966 — 13 per cent more than in October but 12 per cent down on last year, says ­Insolvency Service data.

Typhoo tea and Homebase both went bust, but parts of the business were sold to rescue buyers.

A.I a Capita idea

OUTSOURCING firm CAPITA is to ramp up the use of AI rather than replace all of its workers who leave voluntarily.

The major contractor for the Government and local councils has about 41,000 globally but said around 21 per cent quit each year.

Capita expects a £20million rise in staffing costs from the Budget — prompting it to ramp up its cost savings target from £160million to £250million.

It said AI is already used in its contact centres and for local government work.

It also helps to win more clients.