Employers groups claim expected interest hike will not force companies to increase wages

The expected interest rate hike to 6% – the sixth of its kind in 12 months – will not force companies to increase wages, say employers’ goups.

A spokesman for manufacturers’ organisation the EEF told Personnel Today: “All the survey evidence suggests otherwise. Companies cannot raise prices – they have to be competitive.”

This comes after speculation that Meryvn King, governor of the Bank of England, is watching firms’ wage bills closely, with a view to raising interest rates from the current 5.75% to tackle inflation.

But the EEF insisted the threat to firms from an interest rate hike was minimal. “Companies are hardly jumping up and down about interest rates and inflation,” the spokesman said.

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Andrew Smith, chief economist at financial services firm KPMG, said: “The [Bank of England] Monetary Policy Committee’s latest Inflation Report suggests that to meet the inflation target, a period of slower growth will be necessary – probably entailing at least one more interest rate hike.

“However, with growth projected to stabilise around its trend rate, any weakening of the labour market should not be too severe.”