Average pay rises in the past six months stabilised at 3.8% according to figures released today by IDS Pay Databank.

However, the monitoring body is predicting a much wider range of pay settlements for the next two quarters - of between an average of 3% and 4.3% as rising inflation impacts the cost of living.

Ken Mulkearn, editor of the IDS Pay Report, said: "It is not possible to predict what will happen to pay rises. Some firms will be able to maintain the purchasing power of their employees' salaries. Meanwhile, others - more affected by the downturn - will pay towards the lower end of the range of increases. The result will be a wider spread of settlements as sectors are affected in different ways by economic difficulties, and firms increasingly operate at different speeds.'

The all-items Retail Price Index, the main measure of inflation for setting pay, stands at 4.8%. It is forecast to remain at this level until March 2009.