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REFILE-UK wage growth nears 2-1/2-year high, boosting chances of BoE rate hike

hike@ (Adds missing word from headline) LONDON, March 21 (Reuters) - LONDON, March 21 (Reuters) - British workers' overall pay rose at the fastest pace in nearly two-and-a-half years over the three months to January, bolstering the chances that the Bank of England will raise borrowing costs in May. Wednesday's official data also showed an end to a nine-month run of falling wages, including bonsuses, in inflation-adjusted terms and a much larger rise in employment than analysts had expected. Britain's economy slowed in 2017 as higher inflation - caused by the post-referendum fall in the pound - hurt the spending power of consumers, although forecasts of a bigger hit to growth were confounded and job creation was strong. The Office for National Statistics said workers' total earnings, including bonuses, rose by an annual 2.8 percent in the three months to January, the biggest increase since the three months to September 2015 and compared with an upwardly revised 2.7 percent rise in the three months to December. That beat all forecasts in a Reuters poll of economists that had pointed to a reading of 2.6 percent. Last month BoE Chief Economist Andy Haldane said he expected to see overall wage growth pick up from January onwards, likely hitting 3 percent the end of the first quarter, as well as a return to wage growth in real terms. Excluding bonuses, the pick-up in wage growth was a little more muted. Regular pay rose by 2.6 percent, as expected, following a 2.5 percent rise in the three months to December. January is an important month for wage settlements and a survey published overnight suggested pay awards by British employers rose by the most in more than two years in the November-January period, increasing by a median annual rate of 2.5 percent. The expected increase in pay growth is a major reason why the BoE said in February that it expected interest rates to rise faster and to a greater extent than they thought a few months previously. The ONS said the number of people in work grew by 168,000 in the three months to January. A Reuters poll of economists had pointed to a much smaller rise of 84,000. The data also showed the unemployment rate edged back down to its four-decade low of 4.3 percent after it rose briefly to 4.4 percent. The number of unemployment benefit claimants rose by 9,200 to 838,000 in February. The number of vacancies fell to 816,000 in the three months to February from 824,000 in the three months to January, marking the first drop in seven months. Economists taking part in the Reuters poll had expected the number of benefit claimants to rise by 5,400. Separate ONS figures showed Britain's government recorded a February budget deficit of 1.3 billion pounds, slightly more than the Reuters poll consensus of 1.1 billion pounds. That took the deficit in the first 11 months of the current financial year to 41.4 billion pounds, down 5.7 percent from the same point a year ago. Last week, Britain's official budget forecasters cut their projection for the full 2017/18 financial year shortfall to 45.2 billion pounds, or 2.2 percent of GDP, the lowest since 2001/02. (Reporting by Andy Bruce and William Schomberg)

(Reporting by Andy Bruce)