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Savings specialist Kevin Brown comments on today’s inflation announcement

Rate cuts still on the cards despite strong wage growth; Kevin Brown, savings specialist at Scottish Friendly, comments on this morning’s wage and employment data from the ONS:

“Although we have seen some significant wage growth, it is a sure bet that households still don’t feel better offer thanks to lots of factors confounding the effect of wage increases on budgets.

“Real wage growth persisting for longer is going to continue leaving the Monetary Policy Committee (MPC) with a dilemma – cut rates too quickly and the combined effect with wages rising could cause a fresh price spike. But stick too long and it could risk the better-than-expected economic data being snuffed out by extending interest rate pressures.

“Strong real wage growth is a big puzzle for the MPC, when taken together with a slowing employment market and lower inflation. It could elect to push on with rate cuts to ease the pressure on households and try and stay ahead of the issue for now.

“For those households considering what to do, a rainy-day fund is an essential step if not already in place for emergencies. Beyond that, with rates falling, families should start to consider longer-term plans and whether investing could provide the greater potential for growth now savings rates aren’t as rewarding.”