Aberdeen: Interest rates hike unlikely under these circumstances

Aberdeen: Interest rates hike unlikely under these circumstances

May 19, 2026

Interest Rates UK

Luke Bartholomew, Deputy Chief Economist at Aberdeen, comments on the UK unemployment figures released this morning:

'Today’s data confirms that the labour market remains soft. Jobs growth has been weak for some time, and the Iran conflict seems to be exacerbating the shock, with payrolls employment down sharply. Rising unemployment is in turn weighing on private sector pay growth.

Normally this slowing in wage growth would be a positive sign that inflation was on a sustainable path back to the 2% target. But inflation is set to surge in coming months due rising energy prices and other spillovers from the Iran conflict. So weaker cash wages and higher inflation means that real, inflation adjusted, wages will start to fall, weighing further on household spending and growth.

All of this creates a dilemma for the Bank of England. But absent a further surge in oil prices, it is hard to see interest rates being increased much if at all in this environment.'

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