UK wage growth has slowed to its lowest rate in more than two years, while unemployment rose to 4.3% in the three months to September, according to new figures from the Office for National Statistics (ONS).

The data, which reveals a mixed outlook for the labour market, has dampened expectations of another interest rate cut by the Bank of England next month.

Wage growth excluding bonuses averaged 4.8% over the quarter, slightly above analyst predictions of 4.7%, but down from 4.9% in the previous period. Including bonuses, salaries rose by 4.3%, up from 3.9% in the previous quarter. Unemployment increased from 4% to 4.3%, while economic inactivity—those not working or looking for work—fell to 21.8%, its lowest in nearly a year.

The slowdown in pay growth and modest rise in unemployment has prompted economists to speculate on the Bank of England’s next move. While the Bank recently lowered interest rates by 25 basis points to 4.75%, some analysts now believe another cut in December is less likely, particularly given Chancellor Rachel Reeves’s recent Budget, which included a 6.7% minimum wage increase that could spur inflation in the short term.

Bank of England Chief Economist Huw Pill commented on the data, highlighting that wage growth remains “sticky” at elevated levels, making it challenging to meet the Bank’s 2% inflation target. The Bank’s Monetary Policy Committee (MPC) has previously indicated that stabilising wage growth is essential to controlling inflation over the long term.

Analysts at Nomura suggest that the higher-than-expected wage figures may be “rogue” and part of a broader declining trend. If wage growth weakens in future reports, the Bank could resume cuts in February. However, markets currently expect rates to hold at 4.75% next month.

Despite the weaker data, the pound fell 0.39% against the dollar to $1.281, while the yield on 10-year UK government bonds increased to 4.445%, reflecting market concerns over ongoing inflation pressures.

ONS Director of Economic Statistics Liz McKeown advised caution when interpreting the data, as recent improvements in data collection methods are still stabilising. “Growth in pay excluding bonuses eased again this month to its lowest rate in over two years,” she noted, though bonuses have affected figures due to one-off public sector payments last year.

As the Bank of England monitors labour market trends, the current outlook suggests that inflation and wage dynamics will continue to play a crucial role in shaping future interest rate decisions.