As One Cycle Ends, Another Begins Amid Growing Divergence

Economic

Summary:

Growth divergences persist and could widen, while policy shifts may reignite inflation pressures in some countries.

We project global growth will remain steady at 3.3 percent this year and next, broadly aligned with potential growth that has substantially weakened since before the pandemic. Inflation is declining, to 4.2 percent this year and 3.5 percent next year, in a return to central bank targets that will allow further normalization of monetary policy. This will help draw to a close the global disruptions of recent years, including the pandemic and Russia’s invasion of Ukraine, which precipitated the largest inflation surge in four decades.

As One Cycle Ends, Another Begins Amid Growing Divergence_1

Though the global growth outlook is broadly unchanged from October, divergences across countries are widening. Among advanced economies, the United States is stronger than previously projected on continued strength in domestic demand. We have raised our growth projection for the US this year by 0.5 percentage point, to 2.7 percent.

Growth in the euro area, by contrast, is likely to increase only modestly, to 1 percent from 0.8 percent in 2024. Headwinds include weak momentum, especially in manufacturing, low consumer confidence, and the persistence of a negative energy price shock. European gas prices remain about five times as high as in the United States, versus twice as high before the pandemic.

As One Cycle Ends, Another Begins Amid Growing Divergence_2

In emerging market economies, growth projections are broadly unchanged, at 4.2 percent and 4.3 percent this year and next. Elevated trade and policy uncertainty is contributing to anemic demand in many countries, but economic activity is likely to pick up as this uncertainty recedes. This includes China, where we now project 4.5 percent growth next year, up 0.4 percentage point from our prior forecast.

Some divergence between large economies has been cyclical, with the US economy operating above its potential while Europe and China are below. Under current policies, this cyclical divergence will dissipate. But the divergence between the US and Europe is more due to structural factors, and the disconnect will linger if these are left unaddressed. It reflects persistently stronger US productivity growth, particularly but not exclusively in the technology sector, linked to a more favorable business environment and deeper capital markets. Over time, this translates into higher returns on US investment, increased inbound capital flows, a stronger dollar and US living standards pulling away from those of other advanced economies. For China, it is notable that potential growth is now more like that of other emerging market economies.

Economic policy uncertainty is elevated, with many governments newly elected in 2024. Our projections incorporate recent market developments and the impact of heightened trade policy uncertainty, assumed to be temporary, but refrain from making assumptions about potential policy changes that are currently under public debate.

As One Cycle Ends, Another Begins Amid Growing Divergence_3

In the near term, a constellation of risks could further exacerbate these divergences. European economies could slow more than anticipated, especially if investors grow more concerned about public debt sustainability in more vulnerable countries. The main risk is that euro area monetary and fiscal policy could simultaneously run out of room if weaker economic activity pushes interest rates back toward the effective lower bound just as insufficient fiscal consolidation raises risk premia, in turn further constraining fiscal policy. In China, should fiscal and monetary measures prove insufficient to address domestic weakness, the economy is at risk of a debt-deflation stagnation trap, where falling prices raise the real value of debt, undermining activity further. The sharp decline in Chinese government bond yields, seen as haven for local investors, shows rising investor concern. Both in China and Europe, these factors could lower inflation and economic growth.

By contrast, while many of the policy shifts under the incoming US administration are hard to quantify precisely, they are likely to push inflation higher in the near term relative to our baseline. Some indicated policies, such as looser fiscal policy or deregulation efforts, would stimulate aggregate demand and increase inflation in the near term, as spending and investment increase immediately. Other policies, such as higher tariffs or immigration curbs, will play out like negative supply shocks, reducing output and adding to price pressures.

A combination of surging demand and shrinking supply would likely reignite US price pressures, though the effect on economic output in the near term would be ambiguous. Higher inflation would prevent the Federal Reserve from cutting interest rates and could even require rate hikes that would in turn strengthen the dollar and widen US external deficits. The combination of tighter US monetary policy and a stronger dollar would tighten financial conditions, especially for emerging markets and developing economies. Investors already anticipate such an outcome, with the US dollar gaining around 4 percent since the November election.

Overall, these near-term risks could lead to further divergence across economies. In the medium term, about five years, the positive effects of the US fiscal shock may dissipate and could even reverse if fiscal vulnerabilities increase. Deregulation efforts can boost potential growth in the medium term if they remove red tape and stimulate innovation. However, there is a risk that excessive deregulation could also weaken financial safeguards and increase financial vulnerabilities, putting the US economy on a dangerous boom-bust path. Medium-term risks to economic output would be heightened by restrictive trade policies and stricter migration limits.

Renewed inflation pressures, should they arise so soon after the recent surge, could well de-anchor inflation expectations this time around, as people and businesses are now much more vigilant about protecting their real income and profitability. Inflation expectations are further away from central bank targets than in 2017–21, which suggests increased risks of higher inflation. In this environment, monetary policy may need to be more agile and proactive to prevent expectations from de-anchoring, while macro-financial policies will need to remain vigilant to avoid a buildup of financial risks.

As One Cycle Ends, Another Begins Amid Growing Divergence_4

The issue is likely to be exacerbated for emerging market economies, given the passthrough of dollar exchange rates to domestic prices and the effects of weaker domestic growth in China. In most cases, the appropriate policy response in emerging market economies will be to let currencies depreciate as needed while adjusting monetary policy to achieve price stability. However, in cases where inflation dynamics have become clearly unanchored or where there are financial stability risks, capital flow management and foreign exchange interventions could help, as long as these are not a substitute for necessary macroeconomic adjustments, in line with the IMF’s Integrated Policy Framework.

For several countries, fiscal policy efforts have been delayed or insufficient to stabilize debt dynamics. It is now urgent to restore fiscal sustainability before it is too late and to build sufficient buffers to address future shocks that could be sizable and recurrent. Additional delays could trigger a worrying spiral where borrowing costs keep rising as markets lose confidence, further increasing adjustment needs. Recent strains in Brazil’s financial markets, like the reaction to the UK’s September 2022 mini-budget, underscore how funding conditions can deteriorate suddenly.

While any sizable fiscal consolidation is bound to weigh on economic activity, countries should take special care to preserve growth as much as possible along the consolidation path, for instance by focusing the adjustment on reducing untargeted transfers or subsidies rather than government investment spending. To achieve this—and help overcome persistent structural differences driving growth divergences—there should be renewed focus on ambitious structural reforms to directly boost growth. These include targeted reforms to better allocate resources, increase government revenues, attract more capital, and foster innovation and competition.

Finally, additional efforts should be made to strengthen and improve our multilateral institutions to help unlock a richer, more resilient, and sustainable global economy. Unilateral policies that distort competition—such as tariffs, nontariff barriers, or subsidies—rarely improve domestic prospects durably. They are unlikely to ameliorate external imbalances and may instead hurt trading partners, spur retaliation, and leave every country worse off.

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Risk Warnings and Disclaimers

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Warren Takunda

Cryptocurrency

Bitcoin tested $100,000 support on Jan. 21 as the dust settled on US President Donald Trump’s inauguration. Bitcoin ‘Fully Gassed’ to Leave $100K BTC Price Behind — Analysis_1

Bitcoin ‘Fully Gassed’ to Leave $100K BTC Price Behind — Analysis_1

BTC/USD 1-hour chart. Source: Cointelegraph/TradingView

BTC price targets focus on sub-$100,000

Data from Cointelegraph Markets Pro and TradingView showed sellers keeping up the pressure on the six-figure Bitcoin price boundary.

Inauguration Day offered plenty of volatility but ultimately disappointed Bitcoin bulls as Trump made no mention of Bitcoin, crypto or a US strategic reserve involving them.

Longs thus suffered on the day, with 24-hour crypto-long liquidations circling $500 million at the time of writing, per data from monitoring resource CoinGlass. Bitcoin ‘Fully Gassed’ to Leave $100K BTC Price Behind — Analysis_2

Bitcoin ‘Fully Gassed’ to Leave $100K BTC Price Behind — Analysis_2

Total crypto liquidations (screenshot). Source: CoinGlass

“$BTC is targeting the nearest liquidity on both sides,” trading platform Hyblock Capital wrote in part of its latest update on X. Bitcoin ‘Fully Gassed’ to Leave $100K BTC Price Behind — Analysis_3

Bitcoin ‘Fully Gassed’ to Leave $100K BTC Price Behind — Analysis_3

BTC liquidations data. Source: Hyblock Capital

Traders entertained the idea of another sweep of liquidity in the mid to high $90,000 range next.

“I’d take a long from 99.5K~ if offered. I think gray box needs to hold for local bullishness and sweeping all the Trump leadup / news PA makes sense,” trader Crypto Chase told X followers alongside the 4-hour chart.

“I'd also accept a sweep of the 97K low, but that's farthest it should go. Any good amount of time spent past 96-97K and my plan / read is likely off. Inval low 90's, aiming for new ATH's.” Bitcoin ‘Fully Gassed’ to Leave $100K BTC Price Behind — Analysis_4

Bitcoin ‘Fully Gassed’ to Leave $100K BTC Price Behind — Analysis_4

BTC/USD 4-hour chart. Source: Crypto Chase/X

Fellow trader XO argued that the December BTC price range was still in control, with lows around $90,000 and highs at $108,000.

“Decembers High & Decembers Low defines the key range for me. Acceptance out of either side most likely resolves in a trend,” they said.

“For now, the market will keep both bulls and bears speculating, but in truth, it’s just another range and that’s where my focus remains.”

Bitcoin “Choppiness Index” points to breakout

Trader and analyst Matthew Hyland emphasized the near-term importance of Bitcoin’s 10-day simple moving average (SMA), currently at $99,969.

“BTC quite the daily candle here. Tapped the 10 SMA then went to new all time highs and then back below resistance but still above the 10 SMA,” he told X followers.

“On this 10 SMA trajectory it will have to decide by Friday to either break back upward or lose the 10 SMA.” Bitcoin ‘Fully Gassed’ to Leave $100K BTC Price Behind — Analysis_5

Bitcoin ‘Fully Gassed’ to Leave $100K BTC Price Behind — Analysis_5

BTC/USD 1-day chart with 10SMA. Source: Matthew Hyland

In a fresh update, James Check, creator of onchain data resource Checkonchain, predicted a new BTC price trend emerging sooner rather than later.

This was thanks to the Choppiness Index, a volatility tool now signaling the end of a period of sideways movement.

“The Bitcoin Choppiness Index is fully gassed, and ready to trend,” Check announced on the day.

“As covered back in late-Nov, the thesis was we likely had several weeks of chopsolidation before properly trending away from the $100k level. We're there.” Bitcoin ‘Fully Gassed’ to Leave $100K BTC Price Behind — Analysis_6

Bitcoin ‘Fully Gassed’ to Leave $100K BTC Price Behind — Analysis_6

Bitcoin Choppiness Index. Source: James Check

Source: Cointelegraph

Risk Warnings and Disclaimers

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Warren Takunda

Economic

The labour market is loosening with the ONS reporting another drop in the number of vacancies in the economy and a rise in unemployment in the three months to November to 4.4% from 4.3%.

The rise was partly driven by a fall of 47,000 in payrolled employment.

Vacancies were down to 812K in December from 813K in November, marking thirty consecutive months of decline and pointing to an underlying trend of loosening labour market conditions.

Yet, the Bank of England won't be minded to sound the all-clear on inflation just yet as average earnings rose by 5.6% year-on-year in November from 5.2% in October and regular pay (which excludes bonuses) rose by 5.6%, a rate that is well ahead of inflation. Falling Employment Sees Bank of England Sharpen the Knives_1

Falling Employment Sees Bank of England Sharpen the Knives_1

The Bank of England considers wages a key driver of inflation: as pay increases, spending power in the economy and demand increases. In turn, as businesses pay out more, they cover costs by raising prices.

"Earnings growth remains at a clip that is, clearly, incompatible with a sustainable return to the Bank of England's 2% inflation target over the medium-term," says Michael Brown, Senior Research Strategist at Pepperstone.

However, Brown also notes a statistical base effect is behind the jump, as this year's data is flattered by an unusually low print at the same time last year.

"The wage strength is surprising at first glance, but there is simply no longer the kind of momentum in the economy required to keep it going," says Matt Lewis at TopMoneyCompare.com.

Another measure of pay growth, the more timely PAYE income tax measurement, shows a 0.8% m/m fall in December, pushing down the 3-month y/y rate from 6.4% in November to 5.6% in December.

"That may mean this latest burst of wage growth is already fading," says Ashley Webb, UK Economist at Capital Economics. Falling Employment Sees Bank of England Sharpen the Knives_2

Falling Employment Sees Bank of England Sharpen the Knives_2

Financial markets see the next interest rate cut at the Bank of England falling in February, with one or two more seen over the remainder of the year.

Most economists we follow think the market is underpriced and that the Bank will cut on at least four occasions if not more.

Key to this move would be a deterioration in the labour market, which would weigh on wages and ultimately cool inflation.

For the Pound, this implies a high likelihood of a dovish tilt in market pricing.

"Overall, some Monetary Policy Committee members may be worried by the resurgence in regular private sector pay growth. But we suspect most of them will look at the signs that the loosening in the labour market will mean that wage growth will soon resume a downward trend," says Webb.

Falling Employment Sees Bank of England Sharpen the Knives_3

Image courtesy of Lloyds Bank.

Source: Poundsterlinglive

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Risk Warnings and Disclaimers

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Cohen

Economic

Dollar will continue to be strong despite huge current account deficit

The real trade-weighted dollar is extremely strong and getting stronger, though still shy of Plaza Accord-era heights (Figure 1). Given dollar strength and strong relative demand, the US is heading in 2025 towards a huge current account deficit, perhaps pushing 4% of gross domestic product.

Figure 1. Real-trade weighted dollar extremely strong

FX Markets 2025: US Bull in the China Shop_1

Financing lofty dollar ‘overvaluation’ and a massive current account deficit might herald a major dollar reversal. But that is not in the cards as strong demand for dollar assets will underpin the buck. Don’t bet on a Mar-a-Lago Accord or dollar ‘devaluation’.

The Federal Reserve faces sticky services prices and a relatively robust economy, complicating efforts to cross the last mile in getting inflation back on target. With the Fed having already scaled back expected 2025 rate cuts from 100 to 50 basis points and financial conditions being arguably accommodative, some ask if any cuts can be expected.

Longer-term rates are rising. That is also due to expectations President Donald Trump will largely succeed in extending the 2017 tax cuts and promulgating others, swelling an irresponsible 7% of GDP budget deficit and associated financing pressures.

Additionally, tariff threats, even if partly implemented, will render exports to the US less competitive, dealing a blow to foreign currencies. Higher tariffs and deportations will prop up inflation. Trump’s bluster will heighten global uncertainties and the dollar tends to appreciate in a risk-off environment.

In short, all signs point to continued extreme dollar strength. But in currency markets, it takes two to tango.

Prospects for euro strengthening are dim. Good progress is being made in getting inflation back to target, while the euro area economy languishes. Markets expect that the European Central Bank will cut its deposit rate by at least 100bps if not more over the next year, in contrast with the Fed’s more restrained posture. France and Germany are in a weakened political state. Europe is unlikely to mount an effective response to Trump. Given a tepid global economy and cranked up Chinese export machine, a weak euro won’t translate much into increased exports. Parity between the dollar and euro is in sight.

The yen should firm modestly over the year but it won’t be smooth sailing. Many analysts project the official rate will be hiked from 0.25% to 1%, influenced by real wage gains, firmer activity and inflation sustained above 2%. They may prove right. But the Bank of Japan at times seems very cautious about lifting – higher rates will lift the government’s interest bill and a stronger yen will push inflation down; fewer hikes put downward pressure on the yen via the carry trade. The BoJ is instinctively a free floater, but the Finance Ministry will unhappily jawbone if the yen is weak and if the yen rises. Sometimes the authorities appear schizophrenic.

The renminbi will be a tale of two currencies – the trade-weighted renminbi and the dollar-renminbi exchange rate.

The authorities have long and unconvincingly suggested analysts should focus on the trade-weighted renminbi. The real renminbi is extremely competitive, down sharply over the last three years (Figure 2). The International Monetary Fund and others suggest China’s current account surplus is roughly 1.5% of GDP and the trade surplus some 3%. Those estimates are in all probability vastly understated given opacity in China’s balance of payments data. China’s manufacturing trade surplus is roughly 10% of GDP.

Figure 2. Real renminbi is extremely competitive

The renminbi-dollar exchange rate is more relevant as a gauge for financial flows. Notwithstanding the enormous current account surplus, capital account pressures weigh heavily on the renminbi given major domestic economic headwinds and looming Trump tariffs. Authorities might be tempted to allow considerable renminbi depreciation in the face of any Trump tariffs. But given concerns about accelerated capital outflows and with the renminbi already hyper-competitive, they will most likely restrain depreciation through an array of opaque tools, without drawing lines in the sand.

A quarter of US trade is with Canada and Mexico. The Loonie is under pressure, having fallen some 7% since the summer following forceful Bank of Canada rate cuts amid a softening economy and weaker commodity prices. The central bank may not be finished. Trump’s trade threats are a wild card. Canadian politics is in turmoil.

The Mexican peso also has fallen since the summer. But with core inflation under 4% and Banco de México’s official rate at 10%, the authorities have substantial scope to react to market developments, while contending with Trump.

If Mexico and Canada can begin sorting out relations with Trump 2.0 over the year, their currencies may have scope to find renewed footing and firm. Otherwise, a rocky economic fallout could occur.

There is every reason the dollar will remain extremely strong for the first half of 2025. US slowing in the second half and greater clarity on Trump’s trade policies might pave the way for some modest easing.

Source：omfif

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Owen Li

Forex

UK labor demand remained weak as employers dissented from the government’s decision to direct them to higher NI contributions.

Traders see the Fed keeping interest rates steady in the next two policy meetings.

The Pound Sterling (GBP) remains steady against its major peers on Tuesday after the United Kingdom (UK) Office for National Statistics (ONS) showed that Average Earnings accelerated in three months ending November. The agency reported that Average Earnings Excluding Bonus, a key measure of wage growth, rose at a robust pace of 5.6%, faster than estimates of 5.5% and the former 5.2%.

Average Earnings Including Bonus also rose by 5.6%, as expected, faster than the 5.2% growth in three months ending October.

Meanwhile, labor growth remained significantly weak, with a fresh addition of 35K workers against the former reading of 173K. The ILO Unemployment Rate rose to 4.4%, higher than estimates and the prior release of 4.3%. Weak labor growth clearly shows employers’ discontent with the government’s decision to increase their contribution to National Insurance (NI).

Bank of England (BoE) officials closely track wage growth data when deciding on interest rates, as wage growth is a major contributor to inflationary pressures in the UK service sector. Technically, stronger-than-expected UK wage growth should have jeopardized recent growing expectations that the BoE will reduce interest rates by 25 basis points (bps) to 4.5% in the policy meeting on February 6. However, soft labor demand would offset this.

Daily digest market movers: Pound Sterling struggles to hold recovery against US Dollar

The Pound Sterling corrects against the US Dollar (USD) on Tuesday after failing to sustain the recovery move to near a 10-day high of 1.2344. The GBP/USD pair declines as the US Dollar (USD) bounces back after President Donald Trump confirms that the universal tariff hikes proposal remains afloat, but “We are not ready for that yet”.

A delay in the tariff hike plan has jeopardized the US Dollar’s outlook as market participants anticipated that the imposition of hefty tariffs would be one of the initial decisions by Trump soon after returning to the White House. The assumption of higher tariffs also forced traders to raise bets supporting the Federal Reserve (Fed) to keep interest rates at their current levels for longer.

Meanwhile, market speculation that the Fed will not announce an interest rate cut decision in the next two monetary policy meetings remains intact. Still, traders are divided over the May policy meeting decision. According to the CME FedWatch tool, traders see an almost 50% chance that the Fed will keep interest rates in the current range of 4.25%-4.50% in May.

On the economic front, investors will pay close attention to the preliminary US S&P Global Purchasing Managers Index (PMI) data for January, which will be published on Friday.

Technical Analysis: Pound Sterling aims to recapture 20-day EMA Pound Sterling Steady Amid Increasing UK Wage Growth Acceleration, Increasing Unemployment Rate_1

Pound Sterling Steady Amid Increasing UK Wage Growth Acceleration, Increasing Unemployment Rate_1

The Pound Sterling declines to near 1.2275 against the US Dollar on Tuesday after posting a fresh 10-day high near 1.2345 earlier in the day. The GBP/USD pair rebounded but failed to reclaim the 20-day Exponential Moving Average (EMA), which trades around 1.2360.

The 14-day Relative Strength Index (RSI) rebounds above 40.00. The bearish momentum would end if the RSI manages to sustain above that level.

Looking down, the pair is expected to find support near the October 2023 low of 1.2050. On the upside, the round-level resistance of 1.2400 will act as key resistance.

Source:FXSTREET

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Trump said late on Monday that he was still considering a universal tariff on all foreign imports to the U.S., but said he was "not ready for that yet."

The universal tariff is considered the most pro-USD outcome of his potential tariff policy, as it has significant inflationary implications for the U.S. while penalising major exporters to the U.S., such as China and the Eurozone.

"You'd put a universal tariff on anybody doing business in the United States because they're coming in and they're stealing our wealth," he said, adding that implementation could be "rapid."

Trump also signed an executive order "addressing unfair and unbalanced trade". It will investigate the feasibility of "implementing an External Revenue Service (ERS) to collect tariffs, duties and other foreign trade-related revenues."

These developments are as hawkish as possible and will limit any USD weakness going forward, as traders will be wary of selling dollars. Trump is moving fast and will maintain a strategy of sowing uncertainty before suddenly surprising everyone with his decisions.

"Trump’s day-one delay on tariffs is no retreat - it’s a power play, and the stakes are sky-high," says Nigel Green, CEO of deVere Group. "Is this a bold negotiation tactic or a reckless gamble? Either way, the consequences could be seismic."

At the very least, the threat of tariffs and Trump's leadership style makes for a volatile FX environment that ultimately favours Dollar strength.

The Dollar index - a measure of USD performance against a basket of currencies - rose as much as 0.7%, the most since December 18 following the comments.

The Pound to Dollar exchange rate rose 1.30% on Monday but turned tail in early Asian trade as markets digested the news, and is lower by half a per cent at 1.2262.

Trump also said overnight that he would impose tariffs of as much as 25% on Mexico and Canada in response to the flow of illegal migrants and drugs crossing the borders, sending the CAD and MXN hurtling lower.

All this tariff talk came as a surprise: earlier in the day, media reports said Trump had asked federal agencies to look into tariffs, suggesting the issue was not an immediate concern. It signalled a more pragmatic approach was being adopted.

This lured FX markets into complacency, making the new threats all the more jarring.

"We're thinking in terms of 25% on Mexico and Canada because they're allowing vast numbers of people” into the US, Trump said in response to questions from reporters in the Oval Office on Monday night. "I think we’ll do it Feb. 1."

"Canada’s a very bad abuser," Trump said, referencing fentanyl and migrants crossing the northern border.

Source: Poundsterlinglive

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Risk Warnings and Disclaimers

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Warren Takunda

Economic

British pay growth stayed stubbornly strong in the three months to November but there were more signs of a softening jobs market, according to data on Tuesday that reinforced the current outlook for Bank of England interest rates.

Growth in private-sector pay excluding bonuses - a measure watched closely by the BoE as a gauge of domestic inflation pressure - rose to 6.0% in the three months to November from 5.5% in the three months to October.

It was the strongest reading since February 2024 and suggested that the central bank's forecast of 5.1% for the fourth quarter as a whole will be overshot by a wide margin.

Sterling and market expectations for a Bank of England interest rate cut on Feb. 6 were largely unmoved by the data.

Economists and investors expect the BoE to cut its main interest rate by 0.25 percentage points to 4.5% on Feb. 6, and economists polled by Reuters expect three further cuts this year, while markets expect one or two more after February.

While pay growth pointed to persistent inflationary pressure, other measures of the health of the labour market have pointed in the opposite direction.

Several business surveys have shown a sharp fall in the outlook for employment since finance minister Rachel Reeves announced big tax increases on employers in her Oct. 30 budget.

Tuesday's data showed the jobless rate rose slightly to 4.4% in the three months to November, its highest since the three months to May, as expected in a Reuters poll of economists.

However, the survey used for calculating the unemployment rate is in the process of being overhauled after response rates fell too low to be a reliable gauge of the jobs market.

Separate data provided by employers to the tax authorities showed the number of employees dropped by 47,000 in December, the sharpest fall since November 2020 and following a 32,000 drop a month earlier.

"The latest figures show a familiar combination of strong wage growth despite further cooling in the labour market, with vacancies falling and an uptick in unemployment. Sticky wage growth remains a key concern for the Bank of England," said Jack Kennedy, economist at Indeed, an online jobs portal.

Pay growth for the whole economy, excluding bonuses, was 5.6% higher in the three months to the end of November than a year earlier, the strongest reading since the three months to May 2024. A Reuters poll had pointed to regular wage growth of 5.5%.

Britain's economy stagnated in the third quarter of 2024, when the prospect of big tax rises in the Labour government's budget hit companies, and the BoE estimates there was zero growth in the final quarter of 2024 too.