Wage growth: The recovery puzzle's missing piece?

INFLATION

With paltry wage inflation stifling productivity growth, the Bank of England would be wrong to raise interest rates before real wages increases are seen, argues James Alexander, head of equity research at M&G Investments

The Bank of England could be pushed into raising interest rates too early, causing the UK's nascent economic recovery to falter. The economy has only just reached pre-recession levels and there is no inflationary pressure to justify tightening monetary policy. Lack of demand suggests the Monetary Policy Committee (MPC) needs to allow nominal wage growth to rise. This will boost demand in the economy, encourage businesses to invest, and thus create the elusive productivity growth which has been lacking so far. Although Bank of England (BoE) Governor Mark Carney has said interest rates ...