Slow wage growth will keep the Bank of England from raising interest rates this year despite strong economic data, according to an influential report.
The EY ITEM Club said in its latest survey that although unemployment is at its lowest since 2008 and wage inflation is at its lowest for a decade, it expects rates will not rise until January 2015.
Its chief economic adviser Peter Spencer said: "The markets are jumping the gun in thinking rates will rise this year. Low inflation, the strong pound, and ongoing risks from the eurozone all suggest caution in raising rates."
The report forecasts real incomes "will recover slowly", growing from 1.8 per cent in 2014 to 2.2 per cent in 2016, in contrast with inflation, which jumped to 1.9 per cent from 1.5 per cent last month.
The survey also expects investment in the housing market to rise from 7.6 per cent this year to 13.4 per cent in 2016 as an industry buoyed by measures such as the UK Government's Help to Buy scheme gains confidence.
But the survey said a shortage of housing means house prices will jump 9.1 per cent this year and 7.4 per cent next year, before slowing to 4.2 per cent in 2016.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article