The Pound Sterling declines to 1.2740 against the USD as the Fed signals only one rate cut this year. Fed policymakers said they want to see inflation declining for months before considering rate cuts. UK’s steady wage growth has raised concerns of persistent inflation in the services sector. The Pound Sterling weakens further to 1.2740 against the US Dollar in Friday’s trading session as the latter remains firm.
UK headline inflation appears to be on course to return to the desired rate of 2%. However, service inflation that is driven by wage growth continues to be a major concern for policymakers. The latest UK Employment report showed that Average Earnings, which is a wage inflation measure, grew steadily in the three months ending April. The pace at which wages are growing is significantly higher than what is needed to bring inflation down to BoE’s target.