Commenting on this morning’s release of labour market statistics, that showed a 0.5 percentage point quarterly rise in unemployment in the three months to July, Kitty Ussher, Chief Economist at the Institute of Directors, said:

“With today’s data showing a weakening labour market, it is now time for the Bank of England to keep interest rates on hold when it next meets on 21^st September.

“Although wage inflation still feels high, the headline rate is now being driven by the recent public sector pay settlements which will not lead to cost pass-through on the part of their employers. Private sector pay wage pressure, although also high, has grown at a lower rate in recent months and is likely to fall further as the labour market loosens and the headline rate of inflation comes down.

“Our own data shows that the large interest rate rise in June led to a worsening in the way that business leaders considered the outlook for the economy. The Bank of England should now give its medicine time to work. The holy grail of a soft landing where we bring inflation down without causing a recession is still possible; the risk now is that too much tightening will unleash a series of negative events that causes the Bank to undershoot its inflation target further down the line.”