The cooling of the UK labor market increases the likelihood of the Bank of England cutting interest rates in August

ChainCatcher message, HSBC analyst Elizabeth Martins said in a report that UK employment data could reverse the situation, favoring a rate cut by the Bank of England in August. Slowing wage growth and rising unemployment have increased market pricing for this outcome.

Recent policies may push wage growth in the opposite direction: new wage taxes could reduce wage growth, while an increase in the minimum wage could boost wage growth. The answer seems to be that so far the Bank of England has been too dovish. Even with May's inflation data coming in weaker than expected, it is not enough to prompt Bank of England policymakers to cut rates next week.