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Wage growth at weakest level since January

There has been a further slowdown in the rate of pay growth, as the Bank of England mulls the timing of an interest rate rise.

The Office for National Statistics (ONS) reported that average weekly wages, excluding bonuses, rose by 2.7% in the three months to May.

That was down from 2.8% the previous month and its peak of 2.9% between January and March.

According to the ONS, the 2.7% figure marked the slowest rate of wage growth since it reported salary progress in January

However, it did report another new record for employment – with the proportion of people in work hitting 75.7% after 137,000 jobs were created over the three months.

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Image: Employment has remained ahead of most forecasts

The performance failed to aid the jobless rate, which remained static at 4.2%.

Rising wages have been a key factor for the Bank as it prepares to determine if the economy is strong enough to withstand an increase in borrowing costs.

It held off in May as policymakers awaited evidence on whether an economic chill in first quarter of the year – largely blamed on the so-called Beast from the East – was temporary.

Support on the monetary policy committee to raise Bank rates from 0.5% grew when it recorded a 6-3 vote in favour of no change, with its chief economist joining the hawks.

Governor Mark Carney has since signalled an increase could be appropriate in August as evidence points to a recovery for the economy during the second quarter – aided by the royal wedding, return of good weather and football’s World Cup.

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Kathleen Brooks, research director at Capital Index, said the market had shifted its focus from the Bank and towards Brexit.

She noted after the employment figures: “The market reaction was muted, with GBP/USD (pound/dollar) trading within a tight range this morning.

“GBP/USD remains just above 1.3250, however upside continues to be thwarted by politics.

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“Although Theresa May narrowly won a Commons vote on her customs union proposal with the EU on Monday evening, there are still threats to her leadership.

“With the next round of EU negotiations not due until October, when the bulk of the UK’s exit from the EU will be hashed out, we expect the pound to remain out of favour in the FX world, and upside in the major GBP pairs to be limited.”

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