Despite modest UK growth upgrade, Bank of England cautions over subdued wage growth

Economic IndicatorsAssociated Press

The Bank of England has modestly upgraded it growth forecast for the U.K. this year but cautioned over the failure of wages to keep pace with the projected expansion.

In its quarterly economic projections Wednesday, the bank raised its 2014 growth forecast to 3.5 percent from 3.4 percent.

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And Governor Mark Carney says the economic momentum is looking more assured, with unemployment expected to drop below 6 percent by the end of the year. Figures earlier showed the unemployment down at 6.4 percent, its lowest in nearly 6 years.

However, the bank halved its forecast for wage growth in 2014 to a below-inflation 1.25 percent.

With wages lagging inflation, Chris Williamson, an economist at Markit, says policymakers will be reluctant to raise interest rates for fear of stalling the recovery.