British wages rose at their weakest rate in four years in the three months to June even as the labour market continued to tighten, official data showed today.
The figures, which followed an unexpected drop in inflation, boosted speculation that interest rates have peaked, knocking the pound and sending rate futures soaring.
The Office for National Statistics said average earnings including bonuses rose 3.3 per cent in the three months to June, below forecasts for a steady reading of 3.5 per cent and the weakest rate since June 2003.
"Wage inflation is just not adding to medium term inflation risks at the moment," said David Page, an economist at Investec. "We think rates have peaked."
Excluding bonuses, earnings growth also eased to 3.4 per cent, its weakest since the three months to July 2003 and the joint lowest since records began in 2001.
The Bank of England has raised interest rates five times in the past year to 5.75 per cent. A week ago, markets were fully pricing in another rise to 6 per cent.
The fall in wage inflation came despite other figures showing a tightening labour market.
The number of people claiming jobless benefit fell by 8,500 in July, bringing the claimant count rate to 2.6 per cent, the lowest since April 2005.
On the internationally comparable ILO measure, the number of unemployed fell by 45,000, the biggest drop since December 2003.