The labour market has been rapidly tightening, but there are reasons to think that this won’t feed into a surge in wage growth soon. Indeed, we think there is at least some slack left in the labour market. Even if we are wrong, we are optimistic that productivity should be able to pick up eventually, allowing firms to increase wages but keep their unit labour costs contained. This all suggests that we are unlikely to see the MPC raising interest rates in a hurry.
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