The pound remained stable on Tuesday after news of a cooling in UK wage growth, with the market not changing its expectations for a status quo at the next Bank of England (BoE) meeting. At around 09:20 GMT (11:20 in Paris), the British currency was gaining 0.07% against the greenback, at $1.3084, and was up 0.06% against the single European currency, at 84.35 pence per euro.
Annual growth in average employee pay (excluding bonuses) reached 5.1% between May and July in the UK, down sharply from 5.4% in the three months to June, according to official figures released on Tuesday. In detail, growth in pay excluding inflation reached 2.2% (excluding bonuses) compared with 2.4% in the previous three months.
Unemployment is falling
At the same time, the British unemployment rate also fell over the period from May to July. However, “the current moderation of wage growth” did not strengthen the prospect of a further BoE rate cut at its next meeting on September 19, notes Kathleen Brooks of XTB. The analyst believes that “the strength of the UK economy and the prospect of sustained long-term inflation, driven by rising public sector wages and the expected increase in the minimum wage” push BoE to be “more cautious than other central banks in terms of rate cuts”.
The British monetary institution began its easing cycle in August, by reducing its interest rate to 5%, after having kept it at 5.25% for almost a year. This decision, taken by 5 votes to 4, shows that“So there is still a significant faction at the BoE that is resistant to rate cuts”notes Ms Brooks. The figures for British growth in July, due on Wednesday, and for inflation in August, due the day before her meeting, will also weigh “certainly” in the BoE’s choice next week, also indicates Richard Carter, analyst at Quilter Cheviot.
