End of hiring crisis raises hopes of interest rate cuts in summer

BRITAIN’S hiring crisis is coming to an end, according to a Bank of England survey that adds to hopes of summer interest rate cuts.

Threadneedle Street’s closely watched survey of chief financial officers showed an increasing number of businesses believe hiring is now back to normal after years of staff shortages.

More finance chiefs said they were finding it “easy” or “normal” to recruit staff than “difficult” for the first time since the Bank started asking the question in October 2021.

The survey also revealed further signs that wage growth was cooling, with UK companies expecting wage growth of less than 5pc for the first time in almost two years.

Andrew Bailey, the Bank’s Governor, has made it clear that wage growth is one of the key indicators policymakers are looking at when it comes to deciding interest rates. Most pay deals are concluded by April.

Inflation has dropped from 11.1pc in October 2022 to 3.4pc in February, fuelling hopes of interest rate cuts. Rates remain at 16-year highs of 5.25pc, squeezing businesses and consumers.

Mr Bailey said last month that interest rate cuts are “on the way” after drops in inflation, adding it was “reasonable” to expect the two or three rate cuts this year priced in by financial markets. HSBC yesterday said it expected inflation to slow to almost 1pc within months as energy costs continue to fall.

Investors believe there is a 50pc chance the Bank will cut rates in June, when HSBC believes inflation will fall to about 1.2pc.

A separate survey yesterday suggested Britain’s economy remains on track to exit recession, despite a slowdown in services activity.

The S&P Global PMI eased to 52.8 in March, down from 53 in February. However, it remained well above the 50 level that separates growth from contraction.

Tim Moore, economics director at S&P Global, said: “Business activity has now expanded for five consecutive months, supported by sustained improvements in new order intakes.”