Pay and MPC signal good rate news

HOPES that interest rates have peaked were boosted today by news of an unexpected slowdown in pay growth and dovish comments from the Bank of England's monetary policy committee.

Official data showed annual average earnings growth eased to 3.7% in the three months to September from 3.8% in the previous three - the weakest since December 2003.

The slowdown was attributed to a change in the timing of some bonuses, as well as less overtime worked, particularly in construction.

The news, which will ease fears that inflation pressures are growing, triggered speculation that the labour market is turning in response to slower economic growth.

The view was backed by a second successive rise in the number of people claiming Jobseekers' Allowance, by 900 to 836,700, in October.

Meanwhile, the minutes of the MPC's latest meeting revealed it did not discuss lifting interest rates this month.

Voting unanimously to keep rates at 4.75%, the MPC said growth in the third quarter was weaker than expected and house price inflation was declining rapidly.

'Inflation expectations seemed well anchored around the target,' it said.