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Pay rising faster than inflation as Bank warns on growth

Average earnings are rising faster than the rate of inflation after years of falling living standards, new figures show.

The Office for National Statistics data came as Mark Carney, the Governor of the Bank of England (BoE) said inflation is more than likely to fall below 1%, and economic growth will be slower than previously expected.

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BoE warns of 'spectre haunting Europe' in growth forecast

File photo: Bank of England governor Mark Carney Credit: Lynne Cameron/PA Wire

The Bank of England today sounded a stark warning over the threat to UK growth of a "moribund" eurozone economy as it trimmed its growth forecast for the UK and predicted a 1% fall in inflation over the next six months.

Governor Mark Carney said: "A spectre is haunting Europe - the spectre of economic stagnation, with growth disappointing again and confidence falling back."

He said it was more likely than not that he would have to write to the Chancellor in the next six months to explain why inflation had fallen below 1%.

The Bank cut its UK gross domestic product (GDP) forecast for next year from 3% to 2.9%, although it still expects 3.5% growth for this year.

However, it predicts an end to the six-year squeeze on living standards, with real terms wage growth rising from around zero currently to reach about 2% by the end of next year. Pay has been lagging behind inflation since 2008.

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