UK regular pay growth, measured excluding bonuses, decelerated to an annual rate of 3.6% in the three months to February, the statistics office reported. That pace represented a smaller slowdown than economists had expected, having forecast a decline to 3.5% from the prior month.
The latest figure compares with a 3.8% annual increase recorded in the month before the three-month period. Economists' consensus had been for a further moderation to 3.5% in regular average weekly earnings - a forecast that the outturn narrowly missed.
Through most of the recent period, the Bank of England had been raising concerns about softer hiring trends. That line of concern held until new geopolitical developments at the end of February altered near-term inflation dynamics.
The outbreak of the Iran war late in February coincided with a jump in energy prices, which has introduced fresh upward pressure on inflation. That shift has led economists to push back their timing for when the central bank is likely to begin cutting borrowing costs.
Officials at the Bank of England have signalled that the weak economic backdrop will make it more difficult for workers to secure larger pay increases as inflation is expected to rise. In that view, subdued labour market conditions may constrain wage bargaining even as consumer prices face renewed upward pressure from energy costs.
Implications for policy and markets remain uncertain. The slightly firmer-than-expected reading on regular pay complicates the outlook for inflation and monetary easing: while wages are not accelerating, they are not slowing as much as anticipated, and energy-driven inflationary forces are countervailing downward pressure from a softer labour market.
Policymakers and market participants will watch forthcoming data closely to assess whether pay growth aligns with the central bank's expectations and how sustained the energy-related inflation shock proves to be.