The labour market continues to exceed expectations, but inflation remains subdued. According to economic theory, which predicts an inverse relationship betweew inflation and and unemployment, (the so called Phillips Curve) what we are seeing right now shouldn't happn. But, as Paul Hollingsworth, UK Economist at Capital Economics explains: "The headline measure of unemployment is probably not a complete guide to the degree of slack left. There is still a large proportion of part-time workers who would like full-time jobs for example. What’s more, subdued real wage growth may also partly reflect the continued weakness in productivity."

Samuel Tombs, Chief UK Economist at Pantheon Macroeconomics said: "Wage growth looks likely to soften over the coming months. CIPD, an HR trade body, reported earlier this week that employers have reduced their plans for the median pay award over the next year to just one per cent, from 1.5 per cent three months ago. In addition, starting salaries for new hires still are rising at a slower pace than before the referendum, according to the REC Report on Jobs survey. Firms are limiting wage increases because their other costs are rising rapidly; sterling’s depreciation has boosted import costs while increases in minimum pension contributions and a new apprenticeship levy have raised non-wage labour costs. Accordingly, with wage gains hovering only just above two per cent, the MPC likely will judge that inflation will come back down to its target without needing to throttle the economy with higher rates this year."