LONDON, Feb 17 - New data from the Office for National Statistics show that annual growth in regular average weekly earnings, excluding bonuses, slipped to 4.2% in the last three months of 2025 compared with the same period a year earlier. That pace matched the consensus in a Reuters poll of economists and represented a decline from the 4.4% recorded in the three months to November.
Wage trends and monetary policy
The Bank of England monitors pay figures closely as one indicator of how long Britains inflation running above target may persist. Earlier in the month the central bank noted that private-sector wage growth was beginning to reflect a softening in the jobs market following a period of unexpectedly strong pay increases.
Market reaction and growth signals
Investors on Monday were pricing in, with near certainty, two quarter-point interest rate reductions by the end of this year. That shift in expectations reflects a transition from immediate worries about inflation toward heightened concerns about labour market strength and the wider economy.
Contributing to those concerns, the ONS last week published weaker-than-expected gross domestic product growth for the October-to-December period. The agency said the performance in that quarter was held back in part by speculation about possible tax increases tied to finance minister Rachel Reeves' budget at the end of November.
Context and implications
Taken together, the pay figures, market pricing and the GDP outcome sketch a picture of an economy in which wage momentum is cooling and growth has lost some steam. The data underscore the twin considerations facing policymakers and investors: the persistence of inflation as signalled by pay, and signs that labour market conditions and overall economic activity are weakening.
Further developments in private-sector hiring, wage negotiations and official growth estimates will be watched closely for signals that could confirm or alter current market expectations for the path of interest rates.