Wages Inflation Beats Prices Inflation Again

Published / Last Updated on 17/10/2023

Figures from the Office for National Statistics have shown that wage increase inflation (National Average Earnings Index NAEI) is still outstripping inflationary price rises i.e. Consumer Prices Index (CPI).

CPI currently stands at 6.7% pa for August 2023 with new figures for September due out tomorrow.(18th October 2023).

That said the Office for National Statistics has released figures for earnings/wage increases with:

  • Public Sector Pay up 6.8% pa (3 months July to August) and
  • Private Sector Pay up 8.0% pa  (3 months July to August)

Giving a weighted average of 7.8% pa.


CPI inflation is expected to remain flat or fall again tomorrow for September inflation figures given petrol/diesel price increases but food prices falling, and this will put added pressure on:

  • Bank of England to increase interest rates is wage increases are outstripping inflation i.e., we have more money in our pockets to spend and drive prices up in the future.
  • Current higher interest rates meaning mortgage rates will be higher have not yet filtered through to all borrowers mean many still have more money in our pockets to spend and drive prices up in the future.
  • Lower CPI inflation will be good for government borrowing as the September inflation rate is what may benefits increases will be set at for April 2024 as well as State Pension increases in April 2024 having the triple lock of the higher of wages inflation, prices inflation and 2.5% pa.
  • This means that the Bank of England may be forced to increase interest rates yet again on 2nd November 2023 (currently 5.25%pa) to try and force prices inflation down further as well as hitting businesses with higher borrowing costs to try and bring wage increases down.

This is a difficult ‘juggling act for the Bank of England.

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