Pay settlements in the engineering and manufacturing sectors have fallen to their lowest level since 1984, according to the latest Engineering Employers' Federation figures.
For the three months to the end of June 2002, the average settlement level fell to 2 per cent, down from 2.1 per cent for the previous three months to the end of May.
The EEF said the figure is given greater significance as it includes settlements for April - the second most important month for wage negotiations.
In addition, during this period, the number of pay freezes and deferred pay settlements both rose slightly to just under one in four and almost 12 per cent of all reported settlements respectively.
EEF deputy director of employment policy David Yeandle believes the latest pay settlement figures show no need for a rise in interest rates.
He said: "These latest figures confirm that wage inflationary pressures in this important sector of the economy remain benign and should cause no worries for the Monetary Policy Committee.
"They reinforce our view that, combined with other economic pressures, there is every justification for interest rates being left on hold for the foreseeable future."