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Britain's wage inflation has hit the four per cent mark, sparking concern about inflationary prospects in 2007.

A survey published today by labour market research firm Incomes Data Services (IDS) says that two-thirds of annual salary changes occur in the first four months of the year – and that this year they will come at the top of the usual three to four per cent range.

The Bank of England will be worried by today's figures because they indicate that wage inflation, one of the largest single upside pressures on the already high 2.7 per cent rate of CPI (consumer price index) inflation, could be larger than previously anticipated.

Howard Archer of research firm Global Insight said that the Bank's monetary policy committee (MPC) would be "perturbed" by the news, but added its effect could be mitigated by other factors.

"The key question is to what extent will the slack in the labour market resulting from the marked overall increase in unemployment since February 2005 and a rapidly growing workforce dilute the bargaining power of workers and limit pay increases?" he asked.

The MPC announces its January interest rate decision on Thursday but analysts universally agree that there is little chance the rate will be changed from its current five per cent this time around.

Instead February's decision is more likely to be the indicator of whether wage inflation worries have prompted headaches within the Bank's austere walls.

Governor Mervyn King has extra reason to be concerned: if CPI inflation exceeds three per cent, as it threatens to do, he will have to write an explanatory letter to chancellor Gordon Brown.