Bank of England's Broadbent sees long-awaited wage recovery

British wages are likely to start recovering some of the ground lost to inflation in recent years as the country's economic recovery builds, a top policymaker at the Bank of England said. "After five years in which the UK economy has looked very sick, it is finally moving out of intensive care," Ben Broadbent wrote in a column published in the Sunday Times newspaper.
"It is reasonable to expect both a continued recovery and, after a difficult few years, growth in real wages as well."
Britain's economy staged a surprisingly strong rebound in 2013 but wages still lag inflation, making living standards a big issue in the run-up to the 2015 parliamentary election.
Broadbent is one of the nine members of the BoE's Monetary Policy Committee which this month backed a new plan by the central bank to keep interest rates at a record low of 0.5 percent until more spare capacity in the economy is used up.
Broadbent echoed comments by BoE Governor Mark Carney about the most likely path for interest rates.
"I do not want to put a date on when bank rate might rise, but when it does the rise is likely to be gradual and limited," he wrote.
"One thing that would help to consolidate the recovery is growth in real pay."
Broadbent said economic output was now more than 6 percent above its trough in mid-2009, during the depths of the financial crisis. But total real wages remained lower.
Broadbent said "there is better news on the way" as the drivers behind inflation in recent years - such as tax increases and higher international commodity prices - ease off.
British inflation last month fell to 1.9 percent, below the Bank of England's target level of 2 percent for the first time in over four years.
Broadbent said there were also "clear signs that business investment is turning the corner" which would help spur the long-awaited productivity growth that the BoE says is essential to secure the economic recovery.
"There is, of course, no guarantee that this will happen," Broadbent wrote, saying the euro zone economy could peter out again and productivity could continue to stagnate. "But there are upside risks too. After all, few expected the economy to grow as quickly as it did last year."