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Investing.com - The U.K. unemployment rate rose more than expected in May, data showed Thursday, while pay growth slowed slightly, offering room for the Bank of England to cut interest rates once more next month.
According to the Office for National Statistics, the jobless rate rose to 4.7% in the three months to May, above the 4.6% seen in the prior month, at which he rate was expected to stay.
This was the highest level since June 2021.
Pay growth across the whole economy, excluding bonuses, fell to an annual 5.0% rate in the three months to May, below the 5.3% seen the prior month, a level which was revised higher from 5.2% previously.
The weakness in the labor market, along with the drop in pay growth, is likely to help the Bank of England policymakers decide to cut interest rates once more at their next meeting in August, with the U.K. central bank having reduced interest rates by four quarter-point steps since August last year.
British inflation has risen steadily since touching a three-year low of 1.7% last September, with the annual rate of consumer price inflation rising to its highest in over a year at 3.6% in June on Wednesday.
However, rising prices have been expected by the Bank of England, with the policymakers forecasting in May that headline inflation would be back on target in the first quarter of 2027.
At the same time, gross domestic product data last week showed an unexpected fall in output in May.
Governor Andrew Bailey has said interest rates are likely to remain on a gradual downward path, as a weaker labor market puts downward pressure on wage growth and the outlook for economic growth remains lackluster.