By William Schomberg and Andy Bruce
LONDON (Reuters) - British pay growth has lagged behind inflation again, official data showed on Wednesday, adding to questions about how quickly the Bank of England will raise interest rates after an initial hike expected on Nov. 2.
The British central bank looks on course to deliver its first increase in borrowing costs in a decade, most economists said after the data, reversing last year's rate cut that followed Britain's vote to leave the European Union.
Britain's jobless rate between June and August held at a 42-year low of 4.3 percent, one reason why the BoE thinks pay is likely to pick up soon.
And while overall annual pay growth of 2.2 percent was weaker than inflation - which hit 3 percent in September, its highest level since 2012 - it was slightly above a median forecast of 2.1 percent in a Reuters poll of economists.
There was slightly stronger growth for workers in the private sector, the Office for National Statistics said.
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"I can't see anything in these numbers that will alter the Bank of England's thinking," Sam Hill, an economist with RBC Capital Markets, said.
However, the stubborn gap between weak wage growth and high inflation meant there was "considerable doubt" about further rate hikes in 2018, he said.
Britain, like the United States and other rich economies, has seen a sharp fall in unemployment which would normally fuel inflation, according to established economic theory. But wages on both sides of the Atlantic have failed to rise in a significant way since the financial crisis a decade ago.
WEAK GROWTH
Despite a slowdown in Britain's economy this year which has been linked to last year's Brexit vote shock, the BoE is widely expected to return rates to 0.50 percent from 0.25 percent on Nov. 2, at the end of its next meeting.
Sterling rose briefly after Wednesday's figures and government bond prices fell slightly before reverting to earlier levels.
The BoE expects pay growth to pick up speed soon because the unemployment rate is below the 4.5 percent level it sees as a trigger for inflation pressure in the economy. It also thinks Brexit will increase price growth in Britain.
However, comments by two BoE policymakers on Tuesday, who noted the weak growth in wages, were seen by investors as a sign of disagreement at the central bank on rate hikes after an initial increase.
The ONS said pay excluding bonuses, earnings rose by 2.1 percent, also a touch stronger than the Reuters poll forecast of 2.0 percent.
In August alone, total wages picked up speed to grow by 2.2 percent after a slowdown in July to 1.7 percent.
The BoE expects wages to rise by 2 percent this year before picking up to 3 percent in 2018 and 3.25 percent in 2019.
The number of people in work rose by 94,000 in the three months to August, about half the increase in the three months to July but still a relatively strong rate of growth.
The steady loss of spending power for households is not just a headache for the BoE. Prime Minister Theresa May has promised help for households and has proposed a cap on power tariffs.
Finance minister Philip Hammond is under pressure to come up with further measures when he announces his budget plan in November. But he has little margin for error given the still weak state of Britain's public finances.
(Writing by William Schomberg; Editing by Janet Lawrence)