UK markets were quick to react to the latest set of data to confirm the growing gap between consumer price rises and wage growth.
The pound reversed early gains against the dollar, while London-listed stocks rallied.
Gilt yields fell as investors headed back towards government bonds with expectations of near-term rises in interest rates further diminished.
Labour market data
Office for National Statistics (ONS) data showed the rate of unemployment remained at a four decade low of 4.6% in April.
It was the latest data on average annual earnings, however, that set off reactions in the financial markets as wage growth eased to 2.1% in April, from 2.3% in March. Analysts forecast a rise to 2.4%.
Figures from ONS a day earlier showed consumer price inflation rose to 2.9% in May – above the Bank of England's end of year forecast of 2.8%, and still uncomfortably above its 2% target rate.
This meant further expansion in the gap between consumer prices and earnings growth and looked likely, analysts said, to contribute to a consumer spending-led economic slowdown in the coming months.
"The drop in real pay adds to worries about the economic outlook," said Chris Williamson, chief business economist at IHS Markit.
"Recent official and survey data have already shown consumer spending coming under strain as households feel the pinch from rising prices and low pay," he added.
Corporations, much like markets, abhor uncertainty.
While the economy has remained robust enough to support continued jobs growth, concerns about how the shaky political landscape and Brexit negotiations will affect business, has kept wage growth low.
"The disastrous decision to hold an election which lost the Conservatives a majority is likely to have hit business confidence hard, adding extra pressure to the economy," said Jake Trask, research director at OFX.
Interest rate expectations
Given the recent data, economists expect further dovishness from the Bank of England at its monetary policy meeting this week, and few expect the Bank to start raising rates until at least 2019.
Williamson added: "In the light of the weak wage growth and uncertainty facing the economy as Brexit discussion get underway, it seems increasingly likely that Bank of England policymakers will keep interest rate on hold."
The pound, having earlier been 0.4% higher against the dollar, fell following the data and was down 0.2% at $1.2740.
Stocks responded well to the prospect of lower rates for longer and the FTSE 100 gained 0.5% to 7,538.